Passing your estate to your beneficiaries as efficiently as possible is a key goal for many people.
However, Inheritance Tax (IHT) receipts have been rising steadily, and are expected to reach another record high in the 2025/26 tax year.
Moreover, the start of 2026/27 saw the introduction of a new combined cap on Business Relief (BR) and Agricultural Relief (AR), which may further increase IHT revenue.
While you may qualify for AR if you own agricultural property, BR is generally more accessible and can be accessed through investments in qualifying companies without needing to be directly involved in running a business.
So, read on to find out what the new limits on BR could mean for you.
New limits on Business Relief were introduced at the start of 2026/27
Historically, there has been no cap on the value of assets that could qualify for 100% BR. However, as of 6 April 2026, this has changed.
In the 2024 Autumn Budget, the government introduced a combined £1 million limit for assets eligible for full relief under BR and AR, due to take effect from April 2026.
This was subsequently revised, and under the updated rules, the combined threshold for 100% relief has been increased to £2.5 million. In addition, any unused allowance can be transferred between spouses or civil partners.
So, with effective planning, couples may be able to pass on up to £5 million of qualifying assets free from IHT. Any eligible assets above this threshold will still benefit from relief, but at a rate of 50% instead.
If your BR-qualifying assets are still likely to be liable after making full use of your allowances, you may want to explore alternative strategies (more on that later).
100% Business Relief is only available for certain assets
You can claim either 100% or 50% BR on eligible assets.
You can claim 100% BR on:
- A business or interest in a business
- Shares in an unlisted company
- Shares in a company listed on the Alternative Investment Market (AIM) until April 2026, after which they will only qualify for 50% relief
- Enterprise Investment Schemes (EIS).
You can claim 50% BR on:
- Shares controlling more than 50% of the voting rights in a listed company
- Land, buildings, or machinery owned by the deceased and used in a business they were a partner in or controlled
- Land, buildings, or machinery used in the business and held in a trust from which the business has the right to benefit.
For assets to be eligible for BR, you must have:
- Held them for at least two years before you died
- Still held them at the time of your death.
The two-year timeframe to qualify for BR is considerably shorter than other IHT planning tools, which can take up to seven years to qualify.
You can still benefit from Business Relief without owning a business
If you run your own business, many of your assets may already qualify for BR.
Even if you sell your business, you may be able to maintain your eligibility by reinvesting the proceeds in other qualifying assets within a certain timeframe, typically up to three years, due to the “replacement property” rule.
However, you don’t need to own a business to benefit from BR, and investors often allocate a portion of their portfolio to BR-qualifying assets as part of their estate planning strategy.
These types of investments are higher risk and may not be suitable for everyone, but they can offer access to potential IHT relief without the need to run a business.
A financial planner can help assess whether this approach is appropriate for your circumstances.
Business Relief is just one component of an estate plan
BR is just one strategy you can use in your estate plan, and it’s most effective when used alongside other allowances and tools.
For instance, one of the simplest ways to reduce potential IHT liability is by making full use of your available nil-rate bands. For the 2026/27 tax year, these are:
- £325,000 standard nil-rate band, available to everyone
- £175,000 residence nil-rate band, which applies when passing your main home to a direct descendant, and tapers for estates worth above £2 million.
So, an individual can pass on up to £500,000 IHT-free, and any unused allowances can be transferred between spouses or civil partners, meaning you and your partner could pass on up to £1 million free from IHT.
As such, with the right planning, a couple can collectively pass on £6 million by combining their nil-rate bands and BR allowances.
If, after careful planning, your estate is still likely to face a substantial IHT liability, you may want to explore other strategies, such as making lifetime gifts or placing assets into trust, to help keep your legacy efficient.
Get in touch
BR can be a highly effective way of keeping your estate efficient, but it’s complex and the recent rule changes may mean you need to revisit your plan.
A financial planner can help you understand how BR fits within your wider estate plan, ensure it is used effectively alongside other strategies, and adapt your plan as the rules shift. This can play a key role in protecting your wealth and ensuring more of your estate is passed on to future generations.
To speak to a financial planner, get in touch.
Email us at hello@vwmwealth.com or call us on 0141 229 4004.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
