The UK Government’s decision to reform Business Relief from April 2026 represents a material shift in the inheritance tax framework for business owners and investors. For decades, Business Relief has been central to estate planning, enabling qualifying business assets to pass between generations with little or no inheritance tax exposure. The revised regime alters that assumption and introduces new limits that will directly affect larger estates and growth businesses.
Under the current system, qualifying trading businesses and certain shareholdings can benefit from 100 per cent inheritance tax relief once held for at least two years. This has allowed founders and long-term shareholders to transfer significant business interests without triggering a liquidity event simply to meet tax liabilities.
From April 2026, the structure changes. A new £2.5 million cap will apply to the amount of business assets that qualify for 100% relief per individual. Any qualifying value above that threshold will receive relief at 50%. Given the standard inheritance tax rate of 40%, the effective tax exposure on the excess rises to 20%. For substantial private companies, scale-ups and long-held trading groups, this introduces a meaningful future liability that may require advance planning. Business owners will need to understand how projected growth, retained profits and future investment rounds could influence estate exposure.
There is some flexibility for married couples and civil partners, as any unused portion of the £2.5 million allowance can be transferred to a surviving spouse or civil partner. This allows up to £5 million of qualifying assets to benefit from full relief across a couple. However, estates exceeding that combined level will still face reduced relief on the balance, potentially prompting earlier intergenerational transfers or alternative structuring.
Arbuthnot Banking Group PLC (LON:ARBB), operating as Arbuthnot Latham, offers private and commercial banking products and services in the United Kingdom. Established in 1833, Arbuthnot Banking is headquartered in London, United Kingdom.
