Business Relief on death

Last updated 5 December 2024

What is Business Relief? 

Business Relief (previously called Business Property Relief or BPR) is a longstanding relief from inheritance tax. For suitable clients, it allows qualifying investments to be left to beneficiaries with relief from inheritance tax (IHT).

Where a BR-qualifying asset is held for at least two years and on death, the asset should attract relief from IHT.

For deaths before 6 April 2026, unquoted BR qualifying investments (i.e. unquoted shares, sole traders, partnerships) and AIM BR qualifying investments are free from IHT for an unlimited value of BR asset.

For deaths after 6 April 2026, unquoted BR investments are free from IHT up to £1 million value, and amounts in excess of this are attract 50% IHT relief. AIM BR shares attract 50% IHT relief irrespective of value. See our post Autumn Budget estate planning now and moving forward page for more details.

Please bear in mind that investments that qualify for BR put an investor’s capital at risk and won’t be right for everyone. Tax treatment depends on individual circumstances which could change in the future. 

Learn more about Business Relief in our helpful Business Relief explained guide.

How Business Relief is treated in an inheritance tax calculation

When calculating a potential IHT bill, total up the value of all assets in estate, then deduct BR-qualifying asset, then deduct the nil rate band (NRB) and residence nil rate band (RNRB) as applicable, then apply 40%. BR-qualifying assets are added back but at 0%.  

Remember, a BR investment does not use up the nil rate band (NRB) or residence nil rate band (RNRB).

This example is a simplified version of an IHT calculation to demonstrate how unquoted BR is incorporated in a calculation.

Spouses and Business Relief

On death, where a spouse who is married or in a civil partnership transfers a BR-qualifying asset to their surviving spouse, the transfer should be an exempt transfer for the deceased spouse. The surviving spouse is deemed to take on the ownership period of the deceased spouse for BR purposes.  

It is only on death that this transfer of ownership period applies, as it does not apply for in-life transfers between spouses. Find out more in our BR and in-life gifting whitepaper.

Business Relief and beneficiaries

BR assets held for two years on death

Where Business Relief assets are held for two years and the individual passes away, and the share transfer to beneficiaries, other than a spouse, the asset should be 0% in the deceased estate.  

The beneficiary should then immediately qualify for BR in their own right under BR successive transfer rules, such that if the beneficiary was to pass away the next day, their estate should also qualify for BR. 

BR assets held for less than two years on death

Where Business Relief asset are held for less than two years on death, the asset should be subject to IHT in the deceased estate.

For the beneficiary taking on the shares, they would need to hold the shares for a further two years to qualify for BR (previously called BPR) in their estate.

Deed of variation and Business Relief 

A deed of variation can be undertaken to amend the will to restructure assets, as necessary.  

The deed of variation can be made up to two years after the death of the relevant individual. The beneficiaries who would be giving up assets as a result of the amendment would have to agree to the deed of variation.  

In the context of BR, a deed of variation may be used for example, where the deceased did not hold the BR shares for two years, and should be subject to IHT if transferring to a non-spouse.  

If there is a surviving spouse, the deed of variation may be used to amend the will, such that the surviving spouse takes ownership of the BR asset. As above, this should be an exempt transfer for the deceased and the surviving spouse takes on the BR ownership period of the deceased.

For deaths after 6 April 2026, it may also be used to structure assets in the most optimal way to maximise the new £1million point unquoted Business Relief allowance that each individual has.

Will drafting and Business Relief

The way assets are drafted in a will is important, to not only maximise the relevant reliefs from inheritance tax, but also to ensure it reflects the wishes for beneficiaries.  

Assets in a will can typically fall into three categories, specific gifts (i.e. an item described precisely), non-specific gifts or a general gift (e.g. ‘all my personal possessions’), and residuary gifts (e.g. remainder of estate).  

Where a BR asset is being left in the will where the will also includes exempt transfers to spouses or charity, then in order to achieve the optimal IHT planning, then such BR transfers are typically left as specific gifts.  

Read more about Business Relief in our will drafting guide.

How to claim Business Relief

IHT400  ‘Inheritance Tax Account’. This is the primary form for when someone passes away.  

The additional forms to claim Business Relief will depend on the type of Business Relief asset held. This will either be:

• IHT412  ‘Unlisted stocks and shares and control holdings’. This form, as the name suggests, are for unlisted stocks and shares and/or controlling holdings. 
• IHT413  ‘Business and partnership interests and assets’. This form relates to sole trader businesses and partnership interests (unincorporated businesses).  

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