Inheritance Tax for Business Owners

Q: How much business property relief can you claim?

Relief is given at 100% or 50%, depending on the asset. For deaths on or after 6 April 2026, 100% relief applies up to a £2.5m allowance on combined business and agricultural property, with 50% relief on value above it, per gov.uk as at July 2026 and subject to change. The allowance can transfer between spouses.

Do business owners pay inheritance tax?

Business owners can be liable, but often less than the headline figures suggest. The business forms part of the estate at its value on death, added to the home, savings and other assets, with the standard 40% rate falling on value above the nil-rate band of £325,000 per person and any residence nil-rate band (gov.uk, as at July 2026, subject to change). Business property relief can then reduce the taxable value of qualifying business assets, sometimes to nil.

What is business property relief?

Business property relief, sometimes called business relief, reduces the value of qualifying business assets when working out inheritance tax. Relief is given at either 100% or 50%, depending on the asset, and the business or asset must generally have been owned for at least two years before death (gov.uk, what qualifies for business relief, as at July 2026, subject to change). It applies to genuine trading businesses, not to businesses that mainly hold investments.

Relief and rate	Position (July 2026)
Standard inheritance tax rate	40%
Reduced rate (10%+ of net estate to charity)	36%
Nil-rate band (per person)	£325,000
Business property relief, higher rate	100%
Business property relief, lower rate	50%
Minimum ownership period	2 years

Relief and rate

Position (July 2026)

Standard inheritance tax rate

40%

Reduced rate (10%+ of net estate to charity)

36%

Nil-rate band (per person)

£325,000

Business property relief, higher rate

100%

Business property relief, lower rate

50%

Minimum ownership period

2 years

Source: gov.uk/inheritance-tax and gov.uk, what qualifies for business relief, as at July 2026 and subject to change. The nil-rate band is fixed until the end of the 2030-31 tax year (5 April 2031) (gov.uk). For the full picture on the reliefs behind these figures, see our note on business property relief.

What qualifies, and what does not

The higher 100% rate can apply to a business or interest in a business, and to shares in an unlisted company, where the business is mainly trading. The lower 50% rate can apply to shares controlling more than half the voting rights in a listed company, and to land, buildings or machinery used in the business but owned personally or through a trust (gov.uk, what qualifies for business relief, as at July 2026, subject to change).

Relief is generally not available where a business mainly deals in securities, stocks or shares, land or buildings, or in making or holding investments, and it may be restricted where a business is being sold or wound up (gov.uk, as at July 2026, subject to change). Whether a business counts as trading rather than investment can be a fine judgement, so this is often an area where owners take advice.

See our fuller explainer on business property relief for the conditions in more detail.

The £2.5m allowance from April 2026

The way business property relief works changed for deaths on or after 6 April 2026. A new allowance applies to the combined value of property in an estate qualifying for 100% business property relief or 100% agricultural property relief, and relief at the lower rate of 50% applies to qualifying value above it (gov.uk, changes to the reliefs, as at July 2026, subject to change). The allowance is set at £2,500,000 per estate, and any unused amount can be transferred to a surviving spouse or civil partner (gov.uk, as at July 2026, subject to change).

Because the allowance can pass between spouses and civil partners, a couple may between them cover up to £5,000,000 of qualifying business and agricultural assets at the 100% rate, on top of the ordinary nil-rate band (gov.uk, as at July 2026, subject to change). Value above the allowance keeps 50% relief rather than losing relief altogether, so the effective inheritance tax rate on that excess is reduced.

A worked example (illustration only). A sole shareholder dies owning shares in an unlisted trading company worth £3,500,000, held for more than two years. For a death on or after 6 April 2026, the first £2,500,000 could attract 100% business property relief, and the remaining £1,000,000 could attract 50% relief, leaving £500,000 of taxable value from the shares (gov.uk, as at July 2026, subject to change). That £500,000 would then be added to the rest of the estate and taxed under the normal rules, with 40% falling on value above the available nil-rate bands (gov.uk, as at July 2026, subject to change). Change the value, the ownership period or whether the business is trading, and the outcome changes, so this is general information rather than a calculation for any real estate.

Lifetime gifts of business assets

Some owners think about passing shares or a business on during their lifetime rather than on death. An outright gift can fall outside the estate if the person making it survives seven years, and gifts made three to seven years before death may attract taper relief on the tax due (gov.uk, rules on giving gifts, as at July 2026, subject to change). Giving away a stake in a company you still run raises capital gains, control and family questions alongside inheritance tax, and the reliefs that apply can differ from those on death. Many people choose to discuss this with a qualified professional before acting.

Trading, not investment. Relief generally depends on the business being mainly trading rather than holding investments.

Two-year ownership. The asset usually needs to have been owned for at least two years before death. Source: gov.uk, as at July 2026, subject to change.

The new allowance. From April 2026, 100% relief is capped by the £2.5m allowance, with 50% above it. Source: gov.uk, as at July 2026, subject to change.

Business owners and inheritance tax in Scotland and Northern Ireland

Inheritance tax is a UK-wide tax, so business property relief, the £325,000 nil-rate band and the 40% rate apply to business owners across Scotland, England, Wales and Northern Ireland alike (gov.uk, as at July 2026, subject to change). What differs is the surrounding succession law. Scotland has its own rules, including legal rights that can give a spouse and children a fixed share of the estate, which can affect how a business is passed on, and it uses confirmation rather than a grant of probate. Where a business or estate touches more than one UK nation, it can be worth taking advice in each.

Frequently asked questions

Do you pay inheritance tax on a family business?

Often less than you might expect, because a trading family business may qualify for business property relief, which can reduce its taxable value by 100% or 50% depending on the asset (gov.uk, as at July 2026, subject to change). The business still forms part of the estate, so the outcome depends on whether it qualifies, its value, and who inherits it.

How much business property relief can you claim?

Relief is given at 100% or 50%, depending on the asset (gov.uk, as at July 2026, subject to change). For deaths on or after 6 April 2026, 100% relief applies up to a £2.5m allowance on combined business and agricultural property, with 50% relief on value above it (gov.uk, as at July 2026, subject to change). The allowance can transfer between spouses.

How long must you own a business to get relief?

As a general rule, the business or qualifying asset must have been owned for at least two years before death for business property relief to apply (gov.uk, as at July 2026, subject to change). There are some situations where earlier ownership can count, for example where one qualifying asset has replaced another, so the detail can matter and often benefits from professional input.

Does business property relief apply to all companies?

No. Relief generally applies to businesses that are mainly trading, and it is not usually available where a business mainly deals in securities, stocks or shares, land or buildings, or in holding investments (gov.uk, as at July 2026, subject to change). Whether a company counts as trading rather than investment can be finely balanced, so many owners discuss it with a qualified professional.

What changed for business owners in April 2026?

For deaths on or after 6 April 2026, 100% business and agricultural property relief is capped by a new £2.5m allowance per estate, with 50% relief applying above it, and any unused allowance can transfer to a surviving spouse or civil partner (gov.uk, as at July 2026, subject to change). Estates with qualifying assets above that level may see more tax than before.

Can I give my company shares away to reduce inheritance tax?

You can, and an outright gift may fall outside the estate if you survive seven years, with taper relief possible on gifts made three to seven years before death (gov.uk, as at July 2026, subject to change). Giving away shares in a business you still run raises capital gains, control and family issues, so it is one option some consider only after taking advice from a qualified professional.

About Fairchild Oldfield

The Fairchild Oldfield team brings together estate planning, tax, independent financial advice and client care, working with families across England and Wales.

Fairchild Oldfield are estate planning specialists and will writers, not a firm of solicitors. This article is general information based on practical experience, not legal, tax or financial advice.

Important: This article is general information only and is not legal, tax or financial advice. Reading it does not create a professional relationship. It is based on the law of England and Wales, and other UK jurisdictions may differ. Figures and rules are current as at July 2026 and are subject to change. Before acting, many people choose to seek advice from a suitably qualified professional, such as a solicitor, a STEP practitioner, an accountant, or an FCA-authorised financial adviser, who can consider individual circumstances.