Since the Autumn Budget 2024, private client advisers and business owners have been navigating a whirlwind of uncertainty. Some rushed to act, others waited for clarity, but now, with the rules confirmed (or as clear as they are likely to get), the countdown to April 2026 has begun. These reforms are seismic and understanding them is critical.
Amid the noise and speculation, our goal is simple: cut through the confusion and give you the essentials. In previous articles written by both myself and my colleagues, the call for action has been to start your legal health check and understand what your position is so that you can plan, once we have certainty. Over this short series, we’ll explain the new rules, outline planning options, and guide you on the steps to take now to future-proof your estate.
In any change it is always beneficial to go back to basics – what is Business Property Relief (or Business Relief) (‘BPR’) when it comes to estate planning? Since its introduction in 1976 BPR has been and still is (despite all the commentary at the moment), a valuable inheritance tax (‘IHT’) relief designed to support business continuity by reducing the tax burden on qualifying business assets. It was designed to prevent a business from having to be sold or broken up simply to pay a tax bill. However, not every business or interest in a business qualifies.
BPR generally applies to:
- A qualifying trading business or an interest in such a business
- Shares in an unlisted qualifying company, including minority holdings
- Shares in a qualifying company listed on the Alternative Investment Market (AIM) of the London Stock Exchange
Businesses that primarily deal in securities, stocks, land or buildings, or focus on making or holding investments do not qualify. For example, buy-to-let businesses are treated as investment businesses and are excluded from BPR.
So long as you satisfy the ownership length criteria needed, you then need to consider what level of IHT relief applies. That depends on the type of business assets owned. BPR offers either 100% or 50% relief:
- 100% relief applies to:
- A business or an interest in a business (this includes partnerships)
- Shares in an unlisted company - 50% relief applies to:
- Shares giving control of more than 50% of voting rights in a listed company
- Land, buildings, or machinery owned by the deceased and used in a business they controlled or were a partner in
- Land, buildings, or machinery used in the business and held in a trust from which the business has the right to benefit
It is imperative that business owners consider the availability of BPR proactively when considering estate or succession planning- whether that is on death, transferring in lifetime or using trusts.
First things first; know what you are worth, where those assets sit, who they sit with and what elements of your estate may qualify for BPR, and at what rate. Valuation is going to play a huge part in estate planning now that there are to be caps in place on the level of relief (see the next BLOG in this series for details of the current and new rules). There are valuable reductions which may be able to be claimed on minority shareholdings.
You may have been through this exercise before, but the availability of BPR is not guaranteed indefinitely. Businesses can change their nature over time, such as shifting towards more of an investment activity or selling qualifying assets. These can jeopardise relief. Unfortunately, it should not be viewed as a ‘set and forget’ allowance. Regular review and professional advice are essential to ensure that relief remains available at a time when it is needed the most.
As part of that evaluation, any existing Wills or planning you have done to date should be reviewed to ensure that whatever route you take, all elements of your estate planning dovetail together.
In this series of 5 articles over the next 5 weeks, the Private Wealth and Corporate Teams will guide you through the reforms and what you need to consider as a business owner to make the most of your planning opportunities. The clock is ticking to April 2026, and these changes aren’t just tweaks, they are game-changing. If you own a business, you need to understand what’s coming.
Are you ready to start your planning? Click here to request a free checklist to help begin that first step in the process and to start a conversation with our legal and tax advisors. You will also receive an invite to one of our free Q&A sessions where you can join our live discussion and ask any questions you may have.