What the changes to Business Relief could mean for your estate planning

Helping to ensure the smooth and thoughtful transfer of wealth across generations is one of the main aims of financial planning.

As such, it’s important to stay informed about any legislative changes that could affect the legacy you are able to leave to your beneficiaries.

In the 2024 Autumn Budget, the government announced significant new restrictions on Business Relief (BR), an Inheritance Tax (IHT) relief available on qualifying business assets. These measures were subsequently revised following the 2025 Budget and are scheduled to come into effect in April this year.

Read on to find out what the changes to BR entail and how they could affect your estate planning.

The rules around Business Relief are changing from April 2026

BR is an IHT relief that can reduce the tax paid on the value of a business or certain business assets when calculating an estate’s liability. It can allow you to efficiently pass on more of your business or investments to your beneficiaries.

While BR is typically associated with business owners, you can also be eligible for it if you hold shares in qualifying companies, meaning you can benefit from potential IHT relief without running a business yourself.

To be eligible for BR, you must have held the qualifying assets for at least two years before your death and still own them when you die.

Qualifying assets may receive either 100% or 50% relief from IHT, depending on what they are.

Historically, there has been no upper limit on the value of assets that could qualify for 100% BR. However, this is set to change.

The government announced reforms in the 2024 Autumn Budget that place a combined cap of £1 million on assets eligible for both 100% BR and Agricultural Relief (AR). However, this was later updated to a combined limit of £2.5 million. The changes are due to take effect from April 2026.

Moreover, married couples can transfer unused allowances between themselves. This means that, with the right planning, you and your partner could pass on up to £5 million of qualifying assets free from IHT.

Any assets above this threshold that would normally receive 100% relief will receive 50% instead.

If you made adjustments to your estate plan based on the previous proposed limits or haven’t yet prepared for any limits on BR, it’s important to revisit your planning in light of the new figures.

You can still benefit from Business Relief once you’ve sold your business

Many business owners feel concerned about selling their business due to the potential IHT implications of losing BR.

However, even after a sale, it may be possible to preserve your BR eligibility by reinvesting the proceeds into other qualifying assets.

Indeed, if you invest within a specific timeframe (typically up to three years after a sale), the ownership period of the original asset can carry over, provided certain conditions are met. This means you don’t have to own the new asset for a fresh two-year period before it becomes eligible for BR. This is known as the “replacement property rule”.

So if you have sold or are planning to sell your business, a financial planner can help you explore options to maintain eligibility for BR.

It is also important to remember that you don’t need to own or run a business personally to benefit from BR. Some non-business owners invest a portion of their portfolio into BR-qualifying investments as part of a wider estate planning strategy.

It’s important to build the changes to Business Relief into your estate plan

BR is just one estate planning strategy you can use alongside a range of other tools and allowances, but it’s important to build the upcoming changes into your plans so you can keep more of your estate efficient.

For instance, one of the simplest ways to mitigate IHT is by making full use of your available nil-rate bands. For the 2025/26 tax year, these are:

£325,000 standard nil-rate band, which is available to everyone
£175,000 residence nil-rate band, which is available when you leave your main residence to a direct descendant, such as a child or grandchild. This allowance tapers if your estate is valued above £2 million and is removed entirely once the estate exceeds £2.35 million.

You can also transfer your unused allowances to your spouse or civil partner. This means that if you combine your nil-rate bands with BR, you and your partner could transfer up to £6 million without incurring IHT.

Once you then factor in other strategies, such as gifting and trusts, you may be able to pass significant wealth across generations with minimal IHT.

A financial planner can help you maximise Business Relief

A financial planner can help you make the most of BR and other IHT allowances and reliefs.

If you own a business, they can assess if it is set up to maximise BR or if you need to make any adjustments. They can also advise on how to manage a sale to ensure you still benefit from BR once you no longer own the business.

If you don’t own a business, a financial planner can work with you to find out if BR aligns with your long-term goals and overall estate planning strategy. If appropriate, they can then advise on suitable investments to help you make use of the relief.

At a later stage, a financial planner can also work alongside your executor or solicitor to ensure the administration process runs smoothly and that any eligible relief is claimed correctly.

By helping you and your loved ones understand how BR fits alongside other estate planning strategies, a financial planner can play an important role in protecting your wealth and helping preserve your legacy for future generations.

To speak to a financial planner, get in touch.

Email [email protected] or call us on 01625 466360.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or will writing.