The fundamentals of IHT and Business Relief

Inheritance Tax (IHT) is no longer paid only by the very wealthiest estates. The Office for Budget Responsibility (OBR) expects IHT receipts to reach a record £8.3 billion in the 2024/25 tax year, before climbing to £8.7 billion in 2025-26, and rising to a staggering £14.5 billion by 2030/3¹.

Against this backdrop of more families facing an IHT liability, the fundamentals matter more than ever. Understanding the allowances, the thresholds and the upcoming changes gives you the foundation for more meaningful conversations about protection, succession and long-term planning.

Explaining IHT allowances and upcoming rule changes

When discussing IHT with clients, it is essential to start with the core allowances and explain them in a way that feels straightforward. The nil-rate band is the simplest place to begin. Every individual has an IHT allowance of £325,000, and anything above that threshold is normally taxed at 40%. The residence nil-rate band requires more careful explanation. Many clients assume it applies automatically, yet it has several conditions. It can only be used against a main residence, the beneficiaries must be direct descendants, and the estate must be valued below £2 million for the relief to apply in full. Once the estate passes that point, the allowance tapers in the same way the personal allowance tapers for income tax. Explaining these limitations can make a significant difference to a client’s understanding of their overall position.

The Autumn Budget 2024

The 2024 Budget introduced changes that advisers must weave into client conversations. Every individual now has a £2.5 million allowance that can be used against qualifying unquoted Business Relief and Agricultural Property Relief assets². Amounts above that still attract relief, but at 50%. From April 2027, unspent pensions will come within the scope of IHT. This is the most substantial shift, as pensions have long been viewed as one of the most IHT-efficient elements of a client’s portfolio.

Setting out these allowances and changes in a clear, structured way can help clients understand why IHT planning is increasingly important. It also creates the foundation for discussing the wider range of strategies available to them, including Business Relief, which has become more relevant as the landscape continues to evolve.

Why many traditional IHT tools fall short for clients

A recurring theme in IHT conversations is that the three most widely used IHT strategies – gift it, trust it, or insure it – all have their own drawbacks, particularly around timing, access and loss of control over the assets.

Gifting is the most obvious example. While it can be effective, the seven-year wait before a gift becomes fully IHT-exempt is a significant barrier for clients who are uncertain about their long-term needs. The loss of access to their wealth can be more difficult still. Clients may be thinking about future care costs, helping children or grandchildren, or simply maintaining financial independence. For many, giving money away outright does not sit comfortably.

The same concerns arise with discretionary trusts. Although they can offer structure and control on the beneficiary side, they also have a seven-year clock and require clients to part with capital potentially needed later. And what about taking out insurance to cover an IHT liability? Well, even whole-of-life insurance, useful in some scenarios, brings its own constraints. Premiums can be prohibitively expensive, underwriting can be slow or complex, and many clients are simply too old to take out suitable cover. So, what’s left? Let’s return to Business Relief.

How Business Relief works, who it can help and why access matters

In a sentence, Business Relief is a two-year IHT solution where the capital remains with the client should they ever need it. Provided the shares qualify and have been held for at least two of the last five years, and are held at death, the estate can claim the relief on the amount invested, so 100% relief on the first £2.5 million invested (and 50% thereafter), or 50% relief across the board for AIM-listed shares.

Speed, access and control are a big part of the appeal. Compared with the seven-year horizon for gifts or trusts, the psychological difference of a two-year timeframe is considerable, especially for clients where time is of the essence.

Business Relief also keeps client capital within reach during their lifetime, particularly important for those worried about future care costs, who support family members or need to maintain financial flexibility in retirement. The inter-spousal transfer rules strengthen this further. If one spouse dies before the two-year qualifying period has passed, the surviving spouse only needs to hold the investment for the remaining time to reach the threshold. That continuity can be reassuring for couples looking to plan together.

Now is a good time for estate planning conversations

The IHT landscape is still evolving, and advisers and paraplanners need to help their clients be ready. Business Relief is one of the few estate planning strategies offering meaningful IHT mitigation alongside access, a short qualifying period and the ability to plan across a couple’s combined allowances. This makes it a sensible and straightforward component of a well-structured and future-facing estate plan.

Important information

The content of this article is provided for information purposes only and does not constitute financial promotion or investment advice. The views expressed in this article are those of the authors and can change at any time. Investor’s capital is at risk. Tax treatment depends on the individual circumstances of the investor and is subject to change. This financial promotion has been issued by Triple Point Administration LLP which is authorised and regulated by the Financial Conduct Authority no. 618187.

¹ Source: OBR, February 2026.

² The government announced an amendment to the initial proposed allowance of £1 million in December 2025.