The relationship between Business Relief and inheritance tax

For almost 50 years, Business Relief has been a valuable relief from inheritance tax (IHT). But from April 2026, the amount of relief available is changing. Here’s what that means in practice.  

What’s changing from April 2026?

Currently, shares in a company that qualifies for Business Relief are fully exempt from IHT after a two-year holding period, provided they are held at the date of death. However, from April 2026 the following changes will come into effect: 

These changes mean that for the first time since it was introduced, there will be a threshold that reduces that amount of Business Relief that can be claimed, and therefore the rate of available IHT relief.  

What is Business Relief? 

To put these changes into context, it helps to understand what Business Relief is designed to do and how it works. Business Relief was introduced by the UK government in 1976 to make it easier for family-owned businesses to be passed from one generation to the next, without triggering a large IHT bill that forced the heirs to sell the business.  

Today, Business Relief has become an important IHT relief, claimed not only by family-owned businesses, but also by investors in Business Relief-qualifying companies.  

How does Business Relief help with IHT? 

As a reminder, IHT is charged at a standard rate of 40% on estates valued at more than the current £325,000 threshold, known as the Nil Rate Band (NRB).

Generally, when calculating the value of someone’s estate, if they own a business or shares in a business, those shares will be included as part of the evaluation for IHT purposes.

However, if the company qualifies for Business Relief, an estate can claim IHT relief on the value of the shares owned, provided the deceased owned the business or shares in the business for at least two years before their death.

How to invest in Business Relief-qualifying companies 

One of the simplest ways an investor can take advantage of the IHT relief offered through Business Relief is to choose a dedicated investment manager – such as Triple Point – to set up an investment portfolio on their behalf.

The investment manager will invest their money into companies it expects to be Business Relief-qualifying. Once the investment has been held for at least two years, provided they are still held when the investor dies, the shares can be passed to the investor’s beneficiaries without them facing an IHT bill on the amount invested.

Which companies are eligible for Business Relief? 

Not all businesses will be eligible for Business Relief. For example, it can be claimed on the value of shares in some ‘unquoted’ qualifying companies. An unquoted company simply means a company whose shares are not listed on a major stock market like the London Stock Exchange. This includes privately-owned companies, sole trader businesses, and limited liability partnerships.

But to meet the criteria determined by HMRC, it must also be a trading company (not created just for investment purposes) or be involved in a qualifying trade or business activity.  

Can a company be listed on AIM and also qualify for Business Relief?

Yes. The Alternative Investment Market (AIM) was launched in 1995 as a sub-market of the main London Stock Exchange. Shares in AIM-listed companies are considered ‘unlisted’ for tax purposes, because the shares are not subject to UK Listing rules. This means that, provided the company meets the other eligibility criteria set by HMRC, shares in many AIM-listed companies can be eligible for Business Relief.  

Which companies are not eligible for Business Relief? 

A company won’t qualify for Business Relief if: 

• It is listed on the main London Stock Exchange.
• It deals in stocks and shares, land or buildings.
• It is a not-for-profit organisation.
• It is being sold or being wound-up and will no longer carry on its business.

How is Business Relief claimed by estates? 

Business Relief has to be applied for, either by the executor of the deceased’s will, or the administrator of their estate. This application is made by completing Inheritance Tax Return Form IHT400 and making a claim for Business Relief in the relevant section.

HMRC will confirm whether a claim for Business Relief has been accepted and applied when the estate is notified of any IHT due on the estate. 

Important information

Tax treatment depends on the individual circumstances of each client and is subject to change. Tax relief depends on the companies we invest in maintaining their qualifying status. As with any investment, there is no guarantee that the target return will be achieved and investors may get back less than the amount they invested.