Answers · UK 2025/26
What is Business Property Relief for Inheritance Tax?
Business Property Relief (BPR) reduces Inheritance Tax on qualifying business assets. 100% relief applies to shares in unquoted trading companies and sole trader/partnership businesses; 50% relief applies to quoted controlling shareholdings and assets used in a business you own. A minimum 2-year ownership period is required. From April 2026, the 100% BPR is capped at £1 million per estate.
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Business Property Relief (BPR) is one of the most powerful IHT reliefs available, potentially removing business assets from the IHT charge entirely. It is governed by IHTA 1984 ss.103-114. The rates and qualifying assets are: 100% BPR -- shares in an unquoted trading company (including AIM-listed shares, since AIM is not a "recognised stock exchange" for IHT purposes); a business carried on as a sole trader; a share in a trading partnership; 50% BPR -- a controlling shareholding in a quoted (listed) company; land, buildings, machinery, or plant owned personally but used by a partnership or company that you control (known as "excepted assets"). The key conditions: the business (or company) must be "wholly or mainly" a trading business -- broadly, more than 50% of its activities must be trading rather than investment (e.g. holding let property or listed investments as a passive investor does not qualify). The asset must have been owned for at least two years immediately before death (or transfer). Excepted assets that are surplus to the business do not qualify for BPR -- for example, cash held in excess of working capital requirements, or investment properties held within the company. Budget 2024 change -- effective from 6 April 2026: the government announced that 100% BPR will be capped at £1 million in qualifying business property per estate. Business property above the £1 million threshold will attract 50% relief (effectively an IHT rate of 20% instead of 40%). This is a major change that will affect owners of significant trading businesses. Agricultural Property Relief (APR) for farmland is subject to a similar combined £1 million cap with BPR from April 2026. Planning implications: business owners should review their succession planning, shareholder agreements, and life insurance in light of the new cap. AIM portfolio investors who relied on the 100% BPR after two years of holding qualifying shares will also be affected above the £1 million threshold.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.