Passing on your business to the next generation is often a lifetime’s work and Inheritance Tax (IHT) can significantly erode that legacy. Business Relief (BR) is a useful tool to reduce the IHT liability on qualifying business assets by 50% or even 100%. However, with important rule changes coming into force on 6 April 2026, now is the time to review your estate plan and ensure your company remains protected.
Consultation on the draft legislation runs until 15 September 2025, but here is an overview of the proposed changes.
How Business Relief Works Today
Under the current IHT regime, BR applies at two rates depending on the asset type:
100% Relief
- Unquoted shares in a trading company
- Shares in a holding company whose subsidiary is trading
- Quoted shares in a qualifying company listed on the Alternative Investment Market (AIM)
- Business assets or an interest in a business
50% Relief
- Listed shares where an individual controls more than 50% of the voting rights
- Land, buildings or machinery owned by the deceased and used in a business they were a partner in or controlled, or if held in a trust that it has the right to benefit from
Key Conditions
- Assets must be held for at least 2 years before death
- The company must be trading (not primarily investment)
What’s Changing from 6 April 2026?
The October 2024 Budget tightened BR and capped the relief available, bringing additional wealth into the scope of IHT. The actions taken include the following:
- Full relief restricted to the first £1 million
- For assets previously qualifying for 100% (except AIM shares), there is a cap of £1 million which can be passed to beneficiaries’ tax free.
- Any value held in these assets more than the £1 million will be charged to inheritance tax with an effective tax rate of 20%.
- The £1 million allowance is combined across Business Relief and Agricultural Relief.
- AIM companies falling out of full 100% Relief classification
- Shares in companies not listed on recognised stock exchanges (such as AIM companies) will only be entitled to 50% relief under the new rules.
Planning Steps to Safeguard Your Relief
Review Your Ownership Timeline
- Check if you’ve held qualifying assets for 2 years.
- Anti-Forestalling rules mean that any assets previously qualifying for the full relief will be classed as falling under the new regime, if gifted post 30 October 2024 where the donor dies on or after 6 April 2026.
Consider Lifetime Transfers
- Transfer qualifying assets between spouses and civil partners to benefit from each allowance. Any unused allowance cannot be shared between individuals, but it is possible to transfer qualifying shareholdings or assets to a spouse, subject to the usual commercial considerations.
- Family investment companies may offer flexible relief planning.
Review Documentation
- Document trading status, ownership dates, and activity splits.
- Prepare supporting evidence to satisfy HMRC in the event of an enquiry.
- Review wills to ensure that spouses and civil partners can each benefit from the allowance.
- Consider whether the IHT liability could be funded by way of a life policy, placed in trust.
How Plus Accounting Can Help
Our IHT and Business Relief specialists guide you through every step:
- Technical Reviews: Verify your company’s trading status and mixed‑use assets.
- Restructuring Advice: Ring‑fence non‑trading activities and protect relief.
- Lifetime Planning: Design gifts, trusts, and family investment structures to maximise relief.
- Ongoing Support: Stay ahead of legislative changes and update your plan as needed.
Don’t let the April 2026 changes catch you unprepared. Contact our team today for a free initial consultation and ensure your business legacy survives and thrives for the next generation.
Author: Jake Standing, Director, Plus Accounting
Any views or opinions represented in this blog are personal, belong solely to the blog owner, and do not represent those of Plus Accounting. All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. Please note that AI has been utilised in generating content for this blog.
Date Published: 28 August 2025