Business Relief frequently asked questions

Business Relief (BR) is a tax relief offered by the government that allows business assets to be left to beneficiaries free from inheritance when someone passes away. It’s available to business owners who pass on their company to their heirs, and to people who have shares in BR-qualifying companies. Find out more about our Business Relief products.

To qualify for Business Relief, shares in a business must have been owned for at least two years and must still be held at the time of death.

Business Relief is available for certain UK trading businesses that meet the qualifying criteria. Many privately owned companies, sole trader businesses, and limited liability partnerships will qualify for BR. Assets that might qualify for BR include:

1. Shares in an unlisted company.
2. Shares listed on the Alternative Investment Market (AIM).
3. Ownership of a family business.

To qualify for Business Relief, a business must not be listed on a main stock exchange. It must also not deal in securities, stocks and shares, investments, property letting, land, or buildings.

When it was introduced in the 1976 Finance Act, the main aim of Business Relief was to ensure that family-owned businesses could continue trading when the owner died, without having to be sold by the family to pay inheritance tax. The value of keeping businesses running is that it’s good for the economy, and the government continues to earn company taxes and income tax from people who work there. Over time, successive governments have recognised the value of encouraging people to invest in trading businesses, whether or not they run the business themselves. It’s a good way to support grassroot businesses in the UK, which are vital for the economy and innovation.

The benefits of making an investment in a Business Relief-qualifying company are:

1. Faster inheritance tax exemption. An investment should qualify for relief from inheritance tax in just two years, provided the shares are still held at the time of death.
2. Greater access and control. Investors retain access to their investment throughout their lifetime and can sell it and get the proceeds back if they need to. Access is subject to liquidity.
3. It’s simple. The process of buying shares in a BR-qualifying company is no different to making other investments.
4. Investment return. Hopefully the value of an investment will grow over the long term.
5. Pass more wealth on. More wealth can be passed on to your family, as they will pay less inheritance tax on your estate when you die.
6. Supports UK economy. Money is put to work in the UK, benefitting the economy and creating jobs.

Relief from inheritance tax is available to compensate for some of the additional risks of investing in BR-qualifying companies. These key risks include:

1. Capital at risk. The value of a BR-qualifying investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest.
2. Tax treatment. Tax treatment depends on personal circumstances and tax legislation could change in the future.
3. Qualifying status. Tax relief depends on portfolio companies maintaining their BR qualification.
4. The investment may be volatile and difficult to sell. The shares of unquoted and AIM-listed companies could fall or rise in value more than shares listed on the main market of the London Stock Exchange. They may also be harder to sell.

This is an easy one: there’s no difference. Business Property Relief is the wording that was written into legislation in 1976. Over time, Business Relief has been adopted as more common language because the ‘property’ in Business Property Relief was often mistakenly confused with physical property.

It’s simple. It’s an investment in shares of a BR-qualifying company. If shares are held for at least two years and are still held on death, they can be left to beneficiaries free from inheritance tax. To qualify for BR, the company must be a trading business that’s not listed on a main stock exchange. Explore our Business Relief investments.

Business Relief is assessed by HMRC on death, when a claim is made.  Claims can be made by the executor of the will or the administrator of the estate of someone who has died holding a BR-qualifying investment. You’ll need to fill in both form IHT400 (Inheritance Tax account) and schedule IHT413 (Business or partnership interests and assets) when you’re valuing the estate. You can find these forms on the GOV.UK website.

Kind of. Business Relief and Agricultural Relief are both types of inheritance tax relief that are available to reduce the value of certain assets when calculating how much tax has to be paid when someone dies. Business Relief applies to qualifying business assets such as shares in unquoted companies, interests in a partnership, or a sole trader business. Agricultural Relief applies to qualifying agricultural assets such as land, buildings, crops, livestock, or farm machinery.

Married couples and civil partners have the benefit of a joint two-year qualifying period. This means that should the investor die within two years of investing, the investment can be transferred to their surviving spouse or civil partner without resetting the two-year clock.

When a Business Relief-qualifying asset is sold during a person’s lifetime, the cash proceeds of the sale are subject to inheritance tax. However, replacement relief can apply if another qualifying asset is bought within three years. In this situation, replacement relief allows the owner of the new asset to retain the relief from the original asset, without resetting the two-year ownership period.