This article is written by:
Andrew Baird
Associate Director
Most advisers approach a new client's estate in the same way: starting with the available allowances before considering more complex planning options. Nil Rate Band, Residence Nil-Rate Band, spousal exemption - the defined, quantifiable reliefs come first. Business Relief (BR) has now joined that list in a way it didn’t previously.
When was a Business Relief allowance introduced? The 2024 Autumn Budget originally proposed a £1 million cap on assets qualifying for 100% BR and Agricultural Property Relief. Following consultation, the government confirmed on 23 December 2025 that the threshold would rise to £2.5 million, with any unused allowance transferable between spouses and civil partners - creating an allowance of up to £5 million for a couple. For unquoted BR-qualifying assets, the allowance now provides 100% relief up to the threshold, while qualifying assets above £2.5 million still benefit from 50% BR, resulting in an effective Inheritance Tax (IHT) rate of 20%. AIM-listed BR shares were left at 50% BR.
Why a defined allowance changes where BR sits This is the first time BR has carried an explicit allowance. Previously, its open-ended nature made it harder to incorporate into a structured estate plan. Now it resembles the Nil Rate Bands: a clear allowance that can be quantified, modelled and incorporated into wider planning discussions. For advisers who build plans around available allowances, BR is no longer a specialist consideration but part of the core planning framework.
What this means in practice for advisers Firstly, unquoted BR-qualifying investments continue to benefit from 100% BR up to the £2.5 million allowance, whereas AIM BR shares remain subject to 50% BR. Where IHT mitigation is the primary objective, that distinction may warrant a fresh review. Suitability remains a client-by-client judgement, not a one-size-fits-all.
Secondly, the picture gets sharper from April 2027, when unspent defined contribution pensions come within the scope of IHT. For many clients, this brings a significant asset into the taxable estate for the first time and may push the estate beyond the £2 million threshold at which the Residence Nil-Rate Band begins to taper.
Modelling the allowance before and after April 2027 The value of advice lies in helping clients quantify the impact. Downing’s IHT Calculator lets you set a client’s position against their available allowances – NRB, RNRB and the £2.5 million unquoted BR allowance – and show how the April 2027 pension change alters their exposure. It helps translate a complex and evolving set of rules into a clear before-and-after picture that clients can understand.
If you’d like to talk through how these changes affect your clients, we’re here to help.
Important notice
Opinions expressed represent the views of the author at the time of publication, are subject to change, and should not be interpreted as investment or tax advice.
This article is for investment professionals only. This article is for information only and does not form part of a direct offer or invitation to purchase, subscribe for or dispose of securities and no reliance should be placed on it. No reliance should be made on this content to inform any investment of tax planning decision.
This content contains information that is believed to be accurate at the time of publication but is subject to change without notice. The explanation of all of the tax rules set out have been written in accordance with our understanding of the law and interpretation of it at the time of publication.
Whilst care has been taken in compiling this content, no representation or warranty, express or implied, is made by Downing as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.
