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IHTM25131 | Business relief: Outline of business relief

From HM Revenue & Customs · Inheritance Tax Manual

Relief is available for certain types of business or business property included in a lifetime transfer (IHTM14000) or the deceased’s death estate.

  • The relief is available on a deemed transfer of value as defined in IHTA84/S3 (4).

  • The relief is available for the deceased’s relevant business property (IHTM25141) anywhere in the world, and

  • It applies to settled property included in the death estate.

  • The relief also applies to occasions on which tax is chargeable IHTA84/Chapter III Part III, IHTA84/S103 (1).

  • In absence of any other special provisions, the relief is not available on other occasions of charge, such as, for example, when conditionally exempt property is sold.

Business relief is due to the extent that the value transferred by a transfer of value is attributable to relevant business property. The relief takes the form of a percentage reduction in the value attributable to the relevant business property. The percentage reduction is deducted from the value transferred by the transfer of value. This means the relief is calculated

  • before the deduction of exemptions, but note that from 6 April 2026 the 100% AR/BR allowance will only apply to chargeable transfers (IHTM11000)

  • before any grossing up (IHTM26001)

  • before any deduction is allowed under IHTA84/S165 for Income or Capital Gains Tax borne by the donee.

For transfers after 10 March 1992 the percentage reduction is 50 or 100 depending on the type of business property transferred. See the information at the bottom of the page for deaths and transfers from 6 April 2026.

Business relief does not reduce the value of the property concerned for Inheritance Tax purposes. When you quantify the amount of exemptions, such as spouse or civil partner (IHTM11032) exemption, in a case where business relief is available, IHTA84/S39A applies.

Also a reduction is not made in the ‘historic’ value of property taken into account in determining the rate of tax chargeable in the relevant property trust regime.

Because of IHTA84/S103(1)(a) in the unlikely event of there being a partially exempt occasion of charge in the discretionary trust regime, the exemption is deducted before business relief is allowed.

For deaths and other transfers (including relevant property trust charges) on or after 6 April 2026, and transfers made within 7 years of a death on or after 6 April 2026 if the transfer was made on or after 30 October 2024, the value of qualifying property subject (if appropriate) to 100% relief will be limited to £2.5m (or up to £5m if 100% relief allowance can be transferred from a pre-deceased spouse or civil partner). More details can be found in the section beginning at IHTM25500.