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Business succession -
The changing landscape of Business Relief (BR): What UK business owners need to know
Discover how the 2026 Business Relief reforms could impact your estate and what steps you can take now to protect your business legacy.
From April 2026, the UK’s Business Relief (BR) regime – long a cornerstone of inheritance tax (IHT) planning for entrepreneurs – will undergo its most significant reform in decades. These changes will reshape how business assets are passed on, reduce the scope of inheritance tax relief available, and introduce new planning challenges for business owners and high-net-worth individuals alike.
If you are a founder, shareholder, or family business owner, understanding the implications of these reforms is important to protecting your legacy.
Before examining the upcoming 2026 reforms, let us revisit the fundamentals of Business Relief and its importance in estate and succession planning.
What is Business Relief (BR) and how does it work?
Business Relief (previously called Business Property Relief or BPR) is UK tax relief designed to reduce or eliminate inheritance tax (IHT) on certain types of business assets when they are passed on either during a person’s lifetime or upon their death. It was introduced to ensure that family-owned businesses could be passed down to the next generation without being sold off to pay a large tax bill.
Business Relief eligibility criteria currently applies to:
- Shares in unlisted trading companies.
- Shares listed on the AIM (Alternative Investment Market).
- Sole trader businesses or interests in partnerships.
Key requirements of Business Relief:
- You must have owned the assets for at least two years before transfer (by gift or death).
- To qualify, the business must be actively trading rather than mainly engaged in investment activities. For instance, there is no relief where the business is wholly or mainly dealing in securities, holding stocks and shares, or buying and selling land or buildings.
What is changing in 2026?
The new legislation affecting Business Relief (BR) was announced in the 2024 UK Autumn Statement. The changes are part of a broader reform of inheritance tax reliefs, including both Business Relief and Agricultural Property Relief.
The new legislation, effective from 6 April 2026, introduces the following key changes:
- 100% Business Relief will be capped at £1 million per individual (or settlement into trust). Any value above this threshold will only qualify for 50% relief.
- AIM-listed shares and other unquoted investments will no longer qualify for 100% relief – only 50% relief will apply.
- Multiple trusts created after this date will share the £1 million cap, limiting the effectiveness of traditional trust planning strategies.
These reforms are intended to better target relief at smaller, family-run businesses and farms. However, they also introduce greater complexity and potential tax exposure for larger estates and high-growth companies.
The impact on business owners and entrepreneurs
- Increased inheritance tax exposure – Businesses could face a higher inheritance tax burden, potentially forcing heirs to sell assets or restructure operations to meet tax liabilities.
- Reduced attractiveness of AIM investments – AIM shares, once a popular IHT planning tool due to their 100% relief status, will become less tax-efficient, impacting both private investors and business owners seeking external capital.
- More complex succession planning –The new cap and trust aggregation rules will require more sophisticated estate planning, especially for those using multiple trusts or planning intergenerational transfers.
Real-world example
Sarah, the founder of a UK tech startup, owns 100% of her company valued at £4 million.
Under current rules:
• Her estate would qualify for 100% Business Relief.
• Her heirs would save £1.6 million in IHT.
• Her estate would qualify for 100% Business Relief.
• Her heirs would save £1.6 million in IHT.
Under the 2026 rules:
• The first £1 million would still be exempt
• The remaining £3 million would receive 50% relief.
• Her heirs would face a £600,000 tax bill – a significant increase.
• The first £1 million would still be exempt
• The remaining £3 million would receive 50% relief.
• Her heirs would face a £600,000 tax bill – a significant increase.
Five planning strategies for the new business relief era
To navigate the upcoming changes, we recommend that business owners consider the following:
1. Review your estate plan
With the new rules taking effect from 6 April 2026, now is the time to assess how your business and estate plans will be impacted.
2. Reassess business valuations
Understanding the current and projected value of your business is essential to determine how much of your estate will fall under the new cap.
3. Review trust structures
If you have used trusts to pass on business assets, you should ensure they are structured to maximise relief under the new rules.
4. Explore alternative planning tools
Options such as family investment companies, employee ownership trusts, or life insurance can help mitigate future tax liabilities.
5. Seek specialist advice
The new rules introduce complexity that requires tailored, expert guidance. A wealth planner ,in conjunction with legal and tax advisers, can help you build a strategy that aligns with your goals and the evolving tax landscape.
Next steps: Protect your business and legacy
The 2026 Business Relief reforms mark a turning point in estate planning for business owners. With the rules becoming more complex and reliefs more limited, proactive inheritance tax planning is now more important than ever.
To ensure your estate is structured effectively and your legacy is protected, speak with your banker to arrange a follow-up meeting with one of our expert wealth planners.
In conjunction with legal and tax advisers, they will help you assess your eligibility for Business Relief, review your current business structure, explore your options, and create a tailored estate plan that that secures your legacy in this new era of business relief.
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