Business Relief in 2025: What’s changed and how business leaders can respond

What is Business Relief?

Business Relief offers relief against the value of an estate on death for eligible business assets, it reduces the value of the estate for the purposes of Inheritance Tax (IHT). The relief is at a rate of 100% (for a business or shares in an unlisted company) or 50% (for controlling holding of shares in a listed company, or for assets used by a business).

Business Relief is available against shares in trading companies which are not listed on a recognised stock exchange. Eligible assets also include trading businesses, parts thereof and assets used in these businesses such as trading premises.

It has also been known as Business Property Relief (BPR); the name was changed recently so it is not misconceived as being available only against the value of land and buildings. Business Relief is also sometimes confused with Business Asset Disposal Relief (BADR) which is a relief against Capital Gains Tax (CGT) on the sale of a business.

What has changed in Business Relief?

Currently, Business Relief applies in full to value of eligible assets. From 6 April 2026, only the first £1 million of eligible assets for any individual will receive 100% Business Relief.

Beyond this threshold, the relief is only applied at 50%, so the effective rate of IHT is 20% (50% of the 40% rate of IHT on estates). These changes do not impact the holding periods, qualifying trades or ownership rules.

What do the recent changes mean for businesses?

The new threshold has had an immediate and serious impact on succession planning for businesses.

Business owners have always had the comfort that they could pass on businesses, business assets and shares in family companies without any concern for IHT being payable on these assets.

From 6 April 2026, family members will have to pay IHT on the inheritance of business assets; although the tax may be paid in instalments, either payments will need to be made out of taxed income or from selling assets in the wider inherited estate.

Since the £1 million threshold is available per person, it will be sensible for the spouse of the business owner to have £1 million of shares to utilise two Business Relief thresholds within the couple’s affairs.

Business owners may consider passing on shares to the next generation in lifetime, as if they survive seven years, the gift will not be taxable and the £1 million threshold will still be available on death. There is no CGT liability on the gifts as the capital gain that exists within the value of the asset can be held over so that the gain only comes into charge on the next sale or transfer of the asset.

Each shareholder will be able to make a gift of up to £1 million of shares or business assets into a trust and pay no immediate IHT due to Business Relief and no CGT due to hold over as described above. Seven years after the gift, the £1 million is again available to the donor at their death, as it is considered unused.

Business owners should be looking at their assets at present and putting plans into place to mitigate future IHT liabilities.

How Gerald Edelman can help

When putting succession planning and corporate structure planning in place, it is important to use experienced, qualified and skilled professionals to give commercial advice that will benefit the business and family members.

At Gerald Edelman, we have decades of experience in advising businesses and families in succession planning.

Case study

We recently advised a business owner who held 100% of the shareholding of a company which offered commercial loans. We wrote to HMRC to get their clearance that the company qualified for Business Relief. We then advised the sole shareholder to retain £1 million of share value to use the Business Relief and to retain shares for continuing income. We then advised them to place £1 million in a discretionary trust and the remainder to be gifted to family individuals.

This put the business owner in the optimal position for Inheritance with a potential reduction in liability of £1 million.

Speak to our advisers today

We are a Firm that does not merely prepare annual accounts and tax returns. We have an open dialogue with our clients and contact them with news and ideas relating to recent developments. In the months coming to the application of the Business Relief threshold, we are discussing this matter with clients in our meetings to ensure that they are equipped to face the new landscape of IHT.

If you have a business valued over £1 million, consider what gifts you might be able to make and what changes to ownership structure can be made to improve the eligibility for Business Relief.

At Gerald Edelman, we are happy to have a no obligation meeting to look at opportunities and provide scope for advice and implementation of gifts and restructuring that may significantly reduce the IHT liability of shareholders and business owners on their death.