From April 2026 the government is introducing a new limit of £1 million per person of Business Relief. Business Relief is valuable as it exempts business assets from inheritance tax (IHT). Anything over that amount still halves the rate of IHT from 40% to 20%.
It is also fast acting as you only need to have owned the business asset for two years to get the exemption.
This is primarily designed for business owners to be able to leave them to their children. However, individuals with an estate liable to IHT can invest in funds that qualify for Business Relief to reduce the tax liability for the next generation. In this context the Relief is still very generous.
Business Relief fund investors have an average age of 80 because the relief is so fast acting these individuals have largely left it too late to gift their money (which requires a seven-year period before becoming exempt).
One thing to be aware of is that the per person £1 million limit is not transferable between husband and wife unlike most other IHT allowances. So, if you have more than £1 million in Business Relief investments between you as a married couple, you should at least leave the surplus to the next generation in your will on the first death. Otherwise, your IHT relief on the second death will reduce from 40% to 20% relief on the surplus over £1 million.
Most wills are already set-up to gift BR assets away to children on the first death as it was common for the survivor to buy back the BR assets from the child using cash. That way the BR assets are inherited on first death IHT-free, but the surviving spouse gets these IHT exempt assets back into their own estate, saving further IHT on their death. However, it isn’t always the case and you should check.
If you have an IHT liability and an adviser, make sure that they are checking any post-budget actions.
We are already advising our clients on this major tax change, from our offices in Hook, Hampshire and throughout the UK.