Using Business Relief to pass on surplus assets more tax-efficiently

Our Business Relief estate planning scenarios are based on situations advisers often encounter, making them a great starting point for discussions with your own clients.

For clients with significant wealth in excess of their lifetime needs, large parts of their estate risk being exposed to inheritance tax (IHT). From April 2027, with pensions brought into scope, IHT exposure will rise for many estates. Business Relief can help reduce this liability.

From April 2026, the first £2.5 million invested in unquoted (privately owned) shares that qualify for Business Relief will attract a 100% rate of relief (an effective IHT rate of 0%). Anything above £2.5m will attract a 50% rate of relief (an effective rate of 20% IHT). For shares to qualify for Business Relief, they must have been owned by the deceased for at least two years before they died. This makes Business Relief particularly relevant for clients who wish to reduce future IHT exposure without making outright gifts or using trusts.

Meet Ali

In this client planning example, Ali is 70 and has built up significant assets. He lives comfortably and does not need to draw an income from his investments. This means that, without action, his estate is fully exposed to IHT at 40%. His beneficiaries could face a tax bill running into the hundreds of thousands.

Using Business Relief for IHT exemption

Ali’s adviser suggests allocating £2.5 million of his assets to a Business Relief-qualifying service in unlisted companies. Provided the shares are held for at least two years and still owned at death, they should qualify for 100% IHT relief. Ali retains control of the investment during his lifetime, without needing to gift it away or settle it into trust, while still removing it from his taxable estate.

Investor’s capital is at risk. Target returns are not guaranteed. This client planning scenario does not take into account investment growth or charges for the investment. It is based on tax rules and personal allowances at January 2026, which could be subject to change and depend on individual circumstances. Tax reliefs depend on the investments maintaining their qualifying status for Business Relief. This scenario is for illustrative purposes only and should not be construed as investment or tax advice.