Business Relief: How It Works and Why It Matters
Inheritance Tax (IHT) is catching more and more families by surprise. House prices keep rising, but the tax-free allowance has been frozen for the past few years. Furthermore, pensions will be subject to IHT from April 2027 which will make even more people subject to IHT. If your estate is worth more than £325,000 (or £500,000 if passing on your main residence), anything above that is taxed at 40%. This can take a huge chunk out of what you leave behind.
Business Relief (BR), formerly known as Business Property Relief or BPR, can reduce or remove this tax. By investing in certain qualifying businesses, the amount invested could become completely tax-free after just two years. That’s a big advantage over gifts or trusts, which currently take seven years before becoming exempt.
From 6th April 2026, some of the reliefs and thresholds will reduce in certain circumstances, so if you’re thinking about using Business Relief, now is the time to plan.
How Business Relief Works
BR is a tax break that applies to anyone, and you don’t need to own a business to benefit from it. If you own or invest in a qualifying business and hold that investment for at least two years, it will reduce the value of your taxable estate when you pass away.
Not all BR products are the same. They invest in a variety of non-listed or AIM listed businesses with established, secure income streams.
Unlike gifts or trusts, BR investors retain control and ownership of investments during their lifetime.
This makes BR useful for:
- People with large estates who want to reduce IHT while keeping control of their money.
- Those who need a quick IHT solution, such as the very elderly or people in poor health, as BR works in just two years instead of seven.
- Business owners who want to pass their company down without a large IHT.
Is Business Relief Right for You?
Who Benefits Most?
- If you own a business, BR can prevent your family from having to sell it just to pay an IHT bill. A qualifying private business can get 100% tax relief, making it easier to pass down.
- If you have a large estate, BR allows you to reduce IHT while keeping control of your money. Unlike trusts or gifting, you don’t have to give assets away during your lifetime to get tax benefits.
- If you need a fast IHT solution, BR can work in just two years, making it a great option for people for whom time is limited.
Who Should Think Twice?
- If your estate is below £325,000 (or £500,000 with property), you won’t get any tax benefit from BR. In that case, other financial strategies may be better.
- If you want low-risk, guaranteed returns, BR may not be right for you. These investments involve smaller, unlisted, or AIM-listed companies, whose shares can be volatile and harder to sell quickly and you could lose your capital.
Choosing the Right BR Investment
Due to their nature, BR providers usually insist on investors taking advice from a regulated professional adviser to ensure suitability of their investment. There are a few distributors who offer BR products on a non-advised basis, but these will only offer a few products.
We can add value by giving you access to a much wider choice, as we offer BR investments on an advised basis only and through ALL of the main UK recognised providers.
How Best Advice Wealth Management Can Help You Get the Most from BR
At Best Advice Wealth Management, we have extensive experience in arranging Business Relief products for our clients.
We offer:
- Access to all major UK BR providers, so you get the full range of options.
- Lowest advice fees – We’re confident that our BR fees are the UK’s lowest, at only 1% of the amount invested (minimum £300), plus provider fees which are typically 2%-3% upfront.
- Expert advice. We are fully authorised and regulated by the FCA.
With the 2026 rule changes on the horizon, now is the time to review your IHT strategy. Acting sooner could mean greater tax savings before new limits take effect.