Inspire Financial Management

Best viewed on a device with a bigger screen...
Tel: 0191 487 7074

inheritance text

Business owners can claim inheritance tax (IHT) business property relief (BPR) if they transfer ownership of their business. However, they might easily overlook extra BPR on related business assets. When can it be claimed and how much IHT will it save?

IHT and business property

Where you own a business, or a share of one, its value can qualify for business property relief (BPR). In effect, it removes 100% of the business‘s value from the charge to inheritance tax (IHT), or in some circumstances 50%. Every £1 of value to which BPR applies can save your estate 40p where 100% BPR applies and 20p where BPR is 50%. Identifying qualifying business assets in your estate is important as it can increase the amount your beneficiaries will receive.

100% or 50%

If you run your business as a sole trader all your business assets qualify for 100% BPR . The 100% relief also applies to shares you own in an unlisted company if its main activity is carrying on a business. 50% BPR applies to the value of land, buildings, machinery and plant, i.e. equipment, you personally own which is wholly or mainly used in the business or partnership of which you’re a partner, or a company which you control. One of the main conditions for the 100% and 50% relief is that you must have owned the assets for two years.

Hidden business assets

While some personally-owned assets used in your business stand out like a sore thumb, such as a business premises, others are far less obvious and might easily be overlooked by the person completing the IHT forms for your estate.

Trap. Personally-owned equipment won’t appear in your company’s or partnership’s balance sheet and might not if you’re a sole trader. The value is therefore easily missed when considering BPR.

Example. Graham died in May 2023. At the time of his death he owned all the shares in Acom Ltd. He personally owned its trading premises, worth £200,000. Graham was also a sole trader. The business showed no fixed assets on its balance sheet but Graham used personally-owned equipment worth £10,000 mainly for the business. He also owned a car, worth £30,000, which he used mainly for work for Acom and his sole trader business.

While Graham’s executors would easily spot the business premises as qualifying for 100% BPR, the equipment and car might slip under their radar. The equipment would qualify for 50% BPR, whereas the rate for the car will depend on its predominant use, i.e. 50% BPR will apply if it was mainly used on company business and 100% if it was mainly used in the sole trader business. Identifying the personally-owned assets as qualifying for BPR would reduce the IHT bill on Graham’s estate by up to £56,000 ((£200,000 x 50%) + ((10,000 + £30,000) x 100%)) x 40% and leave his beneficiaries that much better off.

Tip. To prevent your executors overlooking BPR, keep details of personally-owned assets you use for your business with your records. Review and if necessary update these each year. Cross reference them to your business accounts and tax returns for evidence that the assets were used wholly or mainly for business. Your executors might need these if HMRC enquires into their claims for BPR.

This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit or call 01233 653500.

5th Jan 2024 10:50

Inheritance Tax

Access Key Enabled Navigation
Keywords for: Extra IHT relief for business owners

inspire financial management, stockton on tees, financial management, inheritance tax, accountant, accounting, gateshead