***Please note this guide does not yet reflect the changes announced in the Budget of 30 October 2024***
Quick read:
Business property relief can provide a tax reduction of 50% or 100% from Inheritance Tax on certain business assets that have been owned for two years or longer. Some shares (e.g. shares listed on the AIM market) also qualify for business property relief.
In depth:
What is business property relief?
Business property relief can provide a tax reduction of 50% or 100% from Inheritance Tax on business assets that have been owned for two years or longer. The rate depends on the type of asset owned and not every business asset qualifies. Certain shares such as shares listed on AIM shares qualify for business property relief.
The business must be a qualifying business, the asset must be relevant business property and you must have owned it for two years or longer.
| Type | Relief/reduction from IHT | Minimum ownership period |
| A business or an interest in a business | 100% | Two years |
| Unquoted shares which give control of an unquoted company | 100% | Two years |
| Unquoted shares listed on the Alternative Investment Market (AIM) | 100% | Two years |
| Quoted shares which give control of a company | 50% | Two years |
| Land, buildings, machinery or plant used wholly or mainly for the purposes of the business carried on by a company or partnership | 50% | Two years |
| Land, buildings, machinery or plant available under a life interest and used in a business carried on by the beneficiary | 50% | Two years |
How will it help?
It can reduce your Inheritance Tax bill without having to give your assets away.
Investing in assets that qualify for business property relief can be a good alternative to making lifetime gifts. For example, if you made a gift during your lifetime, you would have to wait for 7 years for it to be tax free (i.e. outside of your estate). However, with assets qualifying for 100% business property relief, they will be tax free after two years. You also still have access to the assets should you require access to the funds whereas with a gift you cannot get it back again.
Do all businesses qualify for Business Property Relief?
No. Certain types of businesses (such as those whose main purpose is to hold investments) do not qualify and it is important to take advice before seeking to rely on Business Property Relief.
What should I consider:
Type of assets
The type of business asset you own is important in determining the amount of relief available.
Selling your business
If you have agreed to sell your business before you die, you may not qualify for Business Property Relief so it is important to plan ahead if you are considering selling your business.
Investments
You do not need to own a business to qualify for Business Property Relief. Some investments such as shares listed on the Alternative Investment Market (AIM) qualify for Business Property Relief.
Risk
Investments that qualify for Business Property Relief tend to be riskier than standard investments and it is essential to take financial advice before making any investment decisions.