Business Property Relief (BPR)
Relief for business assets and shares - reducing inheritance tax on qualifying business interests
Key Takeaways
- • 100% relief available for unquoted shares and business assets
- • 50% relief for controlling shareholdings in quoted companies
- • Must own qualifying assets for at least 2 years
- • Business must be trading (not investment) activity
What is Business Property Relief?
Business Property Relief (BPR) is one of the most valuable inheritance tax reliefs available, potentially eliminating inheritance tax entirely on qualifying business assets. It recognizes that forcing the sale of businesses to pay inheritance tax could damage the economy and employment.
- Typical rates: 100% (unquoted shares; a business or an interest in a business), 50% (certain controlling holdings; land/buildings/machinery used by a company/partnership you control).
- Ownership period: usually 2 years (replacement property rules may aggregate periods).
- Exclusions: investment-type businesses; property subject to a binding contract for sale; excepted assets (e.g., surplus cash).
- Interaction: cannot claim BPR and APR on the same value of the same asset.
- • Unquoted company shares
- • Business or partnership assets
- • AIM-listed shares (50% from 6 Apr 2026)
- • Assets used in business by partners
- • Controlling shareholdings >50%
- • In quoted companies
- • Must have voting control
- • Trading companies only
- • There is a combined £1,000,000 allowance for the 100% rate across APR + BPR together.
- • Qualifying value above £1,000,000 attracts 50% relief.
- • The £1,000,000 allowance is not transferable between spouses/civil partners (separate trust rules apply).
- • Only assets that qualify for the 100% rate count towards the £1,000,000 allowance; 50%-relief assets do not reduce the allowance.
- • Shares on a recognised exchange but designated 'not listed' (e.g., AIM) qualify for 50% BPR (not 100%).
- • Transitional provisions apply for certain lifetime transfers and deaths around April 2026.
Qualifying Business Activities
Not all business activities qualify for BPR. The business must be primarily engaged in trading activities rather than investment or passive income generation.
Qualifies (examples)
- • A business or interest in a business (trading, not investment).
- • Unquoted (unlisted) shares in a trading company.
- • Quoted shares where you control the company (normally >50% voting rights).
- • Land, buildings, machinery that you own and that are used wholly or mainly for the purposes of the business of your controlled company/partnership (usually 50% BPR).
Does not qualify (examples)
- • Businesses wholly or mainly dealing in securities/stocks/shares, dealing in land/buildings, or making/holding investments.
- • Excepted assets held by the business (e.g., surplus cash or assets not required for the trade).
- • Property subject to a binding contract for sale (limited statutory exceptions).
- • Pure property letting businesses (unless they amount to a genuine trading business).
Ownership Requirements
To qualify for BPR, you must meet specific ownership and timing requirements:
Ownership period
You (or the transferor) must normally have owned the relevant business property for at least 2 years at the transfer date. Where qualifying business property has been replaced with other qualifying property, you may aggregate periods to meet the 2-year test (subject to the statutory conditions).
Control Requirements
For quoted company shares, you need voting control (usually >50%). For unquoted companies, any shareholding can qualify regardless of size.
Active Business Test
The business must be actively trading at the time of death or transfer. Businesses that have ceased trading may lose BPR qualification.
An asset is excepted if it is not required for the future of the business and is not used wholly or mainly for the business (e.g., surplus or long-term investment cash, non-business investments). Excepted assets may reduce or eliminate BPR for that part of the value.
Property that is already subject to a binding contract for sale at the transfer date is generally not relevant business property (limited exceptions for reconstructions and certain share-for-share exchanges).
AIM Shares and BPR
Shares listed on the Alternative Investment Market (AIM) are currently treated as unquoted for BPR purposes. However, from 6 April 2026, AIM shares will qualify for 50% relief (not 100%).
- • Higher risk than main market investments
- • Less liquidity and higher volatility
- • Must hold for 2 years to qualify for BPR
- • Company must remain trading and AIM-listed
- • From 6 April 2026: 50% relief only (does not reduce the £1m allowance)
- • Professional advice essential for portfolio construction
Interaction with Other Reliefs
BPR can work alongside other inheritance tax reliefs, but there are important interactions to consider:
You cannot claim APR and BPR on the same value of the same asset. Claim APR first on agricultural value; any excess business value may qualify for BPR if the trading conditions are met. From 6 April 2026, the £1,000,000 allowance for the 100% rate is shared across APR + BPR.
Spouse Exemption
Transfers to spouses are exempt from inheritance tax, so BPR is not needed. However, BPR becomes relevant when the surviving spouse dies.
Annual Exemptions
BPR applies after annual exemptions and other reliefs have been used, maximizing the overall tax efficiency of transfers.
- • Unquoted trading company shares held >2 years → 100% BPR (counts towards the £1m allowance from 6 Apr 2026).
- • AIM shares in a trading company → 50% BPR from 6 Apr 2026 (does not reduce the £1m allowance).
- • Land owned personally and used by your controlled company → typically 50% BPR (consider excepted-asset issues if partly non-business use).
- • Share registers, shareholder agreements, accounts and management reports.
- • Proof the business is trading (not mainly investment).
- • Use of land/buildings/machinery by the controlled entity; licence/lease if relevant.
- • Cash analysis to identify surplus cash vs working capital.
- • Ownership timeline to demonstrate the 2-year test (and any replacement property links).
Planning Strategies
BPR offers significant planning opportunities for business owners and investors:
- • Gift shares during lifetime with BPR
- • Retain control through different share classes
- • Use family investment companies
- • Consider management buyouts
- • AIM portfolio construction
- • Diversification across sectors
- • Regular portfolio reviews
- • Professional fund management
- • Holding excess cash in the business (reduces BPR qualification)
- • Investing in property for rental income (non-qualifying activity)
- • Selling business assets too close to death (breaks 2-year rule)
- • Not maintaining active trading status
- • Assuming all business activities qualify automatically