What Does Business Relief Look Like In 2025 And Beyond
The Chancellor’s 2024 Autumn Budget announced changes which will affect Business Relief investments and increase their prominence as a means of mitigating Inheritance Tax in future.
In this article, we will give an overview of how Business Relief investments work in practice to help you decide whether they could offer a suitable Inheritance Tax planning solution for you.
Introduction and why has Business Relief become more relevant?
- Business Relief investment products – formerly known as Business Property Relief or BPR investments – can play a major role in reducing or eliminating Inheritance Tax.
- You don’t need to own a business to benefit from Business Relief, which is a tax relief available to anyone.
- The Chancellor announced in her 2024 Autumn Budget that from April 2027, pensions passed on to beneficiaries will be subject to Inheritance Tax (IHT), having previously been exempt. This is a significant change which will make many more estates liable to pay IHT.
- HMRC receipts from IHT had already hit record levels in 2024/25 and are forecast to continue to increase, but the change in which pensions will be treated means that rate of increase in IHT receipts is likely to rise even further.
- A major benefit of Business Relief investments is that they can become IHT exempt after only 2 years, compared with a 7-year exemption period for gifts or trusts.
- Business Relief investments can also help the very elderly or people in poor health who have not made any provision for estate planning and may otherwise feel they have left it too late.
- Another change announced in the 2024 Autumn Budget is that from April 2026, some of the reliefs and thresholds will reduce in certain circumstances, so if you’re thinking about using Business Relief for Inheritance Tax Planning, now is the time to plan.
Business Relief & Inheritance Tax Planning – Key Points
Inheritance Tax used to be considered a tax payable only by the wealthy. However, decades of rising house prices and the recently announced change in the treatment of pensions as a taxable asset means that an increasing number of people are now faced with a potential IHT liability.
Inheritance Tax is payable at 40% on all taxable assets above IHT thresholds, making Inheritance Tax potentially the largest tax demand your children or beneficiaries will ever face.
There are ways of reducing or eliminating IHT including gifting directly to family members, use of inheritance tax efficient trusts, inheritance tax exempt investments such as Business Relief.
Business Relief products invest in a variety non-listed or AIM listed businesses with established, secure income streams.
Many BR investments provide access to sustainable sectors, such as renewable energy generation or forestry, which means clients can choose to leave a financial legacy for future generations whilst their investment creates a positive impact during their lifetime.
The investor retains ownership of their money and unlike trusts and gifts, which can take seven years obtain 100% IHT relief, BR-qualifying investments are exempt when held for a minimum of just two years and at time of death.
Business Relief – The Risks and how we manage them:
Business Relief products are high-risk investments which invest in smaller, unlisted, or AIM-listed companies. Investments in unquoted companies or those quoted on AIM can fall or rise more sharply than shares in larger companies listed on the main market of the London Stock Exchange, and may be harder to sell, so you may lose your capital.
Consequently, Business Relief providers usually insist on investors taking advice from a regulated professional adviser to ensure suitability of their investment. At Best Advice Wealth Management, we are fully authorised & regulated by the FCA and can add value by giving you access to BR investments on an advised basis, through ALL of the main UK recognised providers.
Further Information
Conclusion
If you have a potential Inheritance Tax liability and wish to pass on as much of your wealth as possible, you should consider an investment in a Business Relief product as a solution.
We strongly recommend consulting with a specialist who can provide personalised advice on this complex subject, based on your specific circumstances. At Best Advice Wealth Management, we have years of experience and are here to help you, so please get in touch for a free, no-obligation initial discussion.