The changes to Business Property Relief (BPR) announced in the 2024 October Budget could have a significant impact on those hoping to transfer their business to loved ones on their death. Here, we explore those changes in more detail.

Business owners have for many years relied on their business interests transferring to their loved ones on death without suffering inheritance tax (IHT). However, the changes to BPR announced in the Autumn Budget last year mean that there will be a 20% charge on inherited business assets worth more than £1 million from 6 April 2026. So what options are available to mitigate the increased IHT liabilities?

What is Business Property Relief?

Your business interests form part of your estate for IHT, and if the value is not covered by your nil rate band of up to £500,000, you could pass on a sizeable IHT bill to your loved ones when you die. Thankfully, BPR of either 50% or 100% may be available to reduce the IHT bill on your business assets. The rate of relief depends on the nature of your business interest.

The 100% rate applies if you own: 

• Shares in an unlisted company; or 

• A business or interest in a business (including a partnership).

While the 50% rate applies if you own:

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

• Land, buildings, or machinery used in a business you’re a Partner in or that is controlled by you; or

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

What are the qualifying conditions for BPR?

The business asset must be held for two years prior to transfer on death, or still be held by the recipient at death if a lifetime transfer, which was not survived by seven years (the asset in question must still meet the qualifying conditions).

The business must be wholly or mainly trading, so cannot be mainly involved in investment activities.