SVM111030 - IHT Business Property Relief - Changes in the rates of relief

Rates of Business Relief

Business relief (BR) was introduced for transfers on or after 7 April 1976 and the rates of relief for the various categories of relevant business property have changed over the years. The rates of relief applicable at varying dates from 7 April 1976 are shown at Appendix 1 of this chapter at SVM111290. For occasions of charge on or after 6 April 1996, the rate of BR was 100% for transfers in respect of unquoted shares, subject to the conditions for relief being satisfied.

With effect for deaths and other transfers from 6 April 2026 (and including transfers made within 7 years of a death on or after 6 April 2026 if they were made on or after 30 October 2024) the highest rate of relief (100%) will be available on the combined value of qualifying agricultural and/or business property up to £2.5 million, or up to £5m if unused allowance can be transferred from a pre-deceased spouse or civil partner. This will only be due on the chargeable value of relievable property and will not apply to exempt transfers of relievable property. Any value in respect of total relievable property which exceeds the allowance will qualify for relief at 50%. See IHTM25500.   

Additionally, shares in companies listed on a market that does not meet the definition of ‘listed’ for HM Revenue and Customs (HMRC) purposes (such as Alternative Investment Market (AIM)) and shares that are traded on a foreign stock exchange that is not a recognised stock exchange, can now only qualify for 50% relief.

For IHT purposes the rates of relief apply to transfers on death on or after the dates shown and also to Potentially Exempt Transfers (PETs) which become chargeable as a result of a death after the relevant date.

Example

X makes a PET out of their unquoted 50% shareholding in 2025 and dies in 2027, still holding the balance of their shareholding. Assuming all the conditions for relief are satisfied, the gifted shares and those held at death will qualify for BR together with any other qualifying assets at a rate of 100% up to the allowance of £2.5m and then 50% thereafter.    

If a transfer of value is chargeable when made for example a gift into a discretionary trust, any lifetime tax chargeable will be calculated on the basis of the rate of BR available at the date of transfer. For cumulation purposes with later gifts, this is also the appropriate rate. However, any additional tax payable by reason of the transferor’s death within 7 years will be calculated on the basis of the rate of BR applicable at the date of death.

Additional Guidance: SVM150000