How to save £5 million in Inheritance Tax using Business Relief

Inheritance Tax (IHT) receipts have been rising steadily year on year for some time, and upcoming policy changes mean they are likely to increase further.

While a range of strategies can help reduce future IHT liability on your estate, Business Relief (BR) and Agricultural Relief (AR) can play a key role if utilised properly.

Earlier limitations announced in the 2024 Budget have now been updated, which may make BR and AR more attractive than previously expected.

Although both BR and AR are available to individuals who hold qualifying assets, BR is generally more accessible as it doesn’t require owning agricultural land or assets. It can also be particularly valuable if you hold shares in qualifying companies, as you can benefit from potential IHT relief without needing to run the business yourself.

So, read on to find out how BR can help your estate save up to £5 million in IHT.

Inheritance Tax revenue has reached record levels and is set to increase further

IHT revenue is set to break new records this year and will rise even more steeply after 2027.

MoneyWeek reports that IHT receipts reached £6.6 billion in the first nine months of the 2025/26 tax year. This marks a 4% increase from the same period the year before, which was itself a record year for IHT revenue. Indeed, analysts forecast that IHT will generate a record £9.1 billion in 2025/26, up from £8.2 billion last year.

The rise in IHT revenue will likely only get steeper, as pensions will become subject to IHT from April 2027. By 2029/30, IHT receipts are predicted to reach around £14 billion.

You can read more about the upcoming changes to pensions and IHT in our previous article on the topic.

So, with IHT revenue already rising and set to increase further, now is the time to start building mitigation strategies into your estate plan.

Recent changes to Business Relief could be integral to estate planning

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

In the 2024 Autumn Budget, the government announced a new combined limit of £1 million for assets eligible for 100% BR and AR, set to come into effect in April 2026.

Then, shortly after the 2025 Autumn Budget, the government made further changes to the limit. The new combined upper limit for assets that qualify for 100% IHT relief is £2.5 million. Moreover, married couples and civil partners can transfer their unused allowances to one another.

This means that with the right planning, you and your partner can pass on up to £5 million of eligible assets IHT-free. Anything eligible for 100% BR or AR above this threshold will receive 50% relief instead.

How Business Relief works

You can currently claim 100% BR on:

• A business or interest in a business

• Shares in an unlisted company

• Shares in a company listed on the Alternative Investment Market (AIM) until April 2026, after which they will only qualify for 50% relief

• Enterprise Investment Schemes.

Additionally, you can claim 50% BR on:

• Shares controlling more than 50% of the voting rights in a listed company

• Land, buildings, or machinery owned by the deceased and used in a business they were a partner in or controlled

• Land, buildings, or machinery used in the business and held in a trust that it has the right to benefit from.

For assets to be eligible for BR, you must have:

• Held them for at least two years before you died

• Still held them at the time of your death.

The timeframe for BR qualification is significantly shorter than other popular IHT planning tools, which can take up to seven years to qualify for full relief.

Both business owners and investors can benefit from Business Relief

If you run your own business, many of your assets may qualify for BR. However, there are elements that can affect eligibility, so it’s important to work with a financial planner to ensure you maximise your allowance.

Even if you sell your business, it may be possible to maintain your BR eligibility by reinvesting in other qualifying assets within a set timeframe, typically up to three years after disposal. This is known as the “replacement property” rule.

So, if you’ve sold or are planning to sell your business, a financial planner can help you ensure you remain eligible for BR.

But it’s also important to remember that you don’t need to run a business yourself to benefit from BR.

Some investors choose to allocate a portion of their portfolio to BR-qualifying investments as part of a wider estate planning strategy.

These investments carry higher risk and are not suitable for everyone. However, they can provide access to potential IHT relief without requiring you to operate a business personally.

Business Relief can form part of a holistic estate plan

It’s important to remember that BR is only one element of a wider estate planning strategy and can be used alongside a range of other tools and allowances.

For example, 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, they are:

• £325,000 standard nil-rate band – this is available to everyone.

• £175,000 residence nil-rate band (RNRB) – this is available when you leave your main residence to a direct descendant, such as a child or grandchild. This allowance tapers for estates valued above £2 million and is no longer available once your estate exceeds £2.35 million.

Additionally, you can combine any unused allowances with your spouse or civil partner, meaning you can collectively pass on up to £1 million IHT-free.

So, if you and your partner make full use of your nil-rate bands alongside BR and AR, it may be possible to pass on up to £6 million of assets without incurring IHT.

Moreover, while BR assets must generally be held for two years before qualifying for relief, certain options include built-in life cover to help protect against a potential IHT bill during that period. This can offer an additional layer of reassurance if you’re concerned about short-term risk.

A financial planner can help you make full use of your allowances

BR can be a highly effective way to mitigate IHT, but it’s complex, and upcoming rule changes may affect how it applies to your circumstances. This is where a financial planner can help.

They can first assess whether BR is appropriate for you and your long-term goals, and if it is, they can advise on which schemes to invest in or assets to buy.

Later, they can work alongside your executor or solicitor to help make the administration process smoother and ensure the relief is claimed correctly.

By helping you and your loved ones understand how BR and other estate planning strategies work, a financial planner can play a key role in ensuring your legacy is preserved for future generations.

To speak to a financial planner, get in touch.

Email info@mlpwealth.co.uk or call us on 020 8296 1799.

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.