If you’re building a business you want to pass on, whether to your kids, your business partner, or anyone else – there’s a tax relief you need to know about. It’s called Business Property Relief, and right now it’s incredibly generous. The problem? It’s also sitting in the government’s crosshairs, and if it gets axed, your family could end up writing a massive cheque to HMRC instead of inheriting your life’s work.
What business property relief actually does
Business Property Relief (BPR) is basically inheritance tax’s get-out-of-jail-free card for business owners. If your business qualifies, you can potentially pass it on without paying any inheritance tax at all. Here’s how powerful this is: say your business is worth £500,000. Without BPR, your beneficiaries could face an inheritance tax bill of £200,000 or more. With 100% BPR? £0.
The catch is you need to have owned the business (or qualifying shares) for at least two years, and it needs to meet certain criteria.
Why this matters more than you think
BPR isn’t just for millionaire dynasties. Loads of ordinary family businesses rely on it to avoid a nightmare scenario where the kids inherit the business but have to sell it immediately just to pay the tax bill.
Think about it: you spend decades building something, then HMRC takes 40% of its value the moment you’re gone. That’s enough to kill most businesses stone dead. But here’s the thing – BPR is so generous that politicians keep eyeing it up as an easy revenue grab. Labour has looked at restricting it before, and with governments always hunting for ways to raise money without increasing headline tax rates, reliefs like this make tempting targets.
The requirements you need to know
BPR typically only works for proper trading businesses. If your “business” is really just a property investment company or holds a bunch of assets, you’re probably out of luck.
The shares or business interests you own need to qualify too, which can get complicated if there are multiple shareholders or complex ownership structures. And remember that two-year ownership rule – if you’re planning any restructuring or transfers, timing matters.
What smart business owners are doing
Getting their structure checked: If your business doesn’t qualify for BPR in its current form, there might be ways to restructure it so it does. But this needs professional advice and proper planning.
Documenting their intentions: Whether it’s in your will or a formal succession plan, make sure it’s crystal clear what you want to happen to the business. Ambiguity costs money.
Planning for change: If BPR gets restricted or scrapped entirely, you might need a completely different approach to passing on your business. Better to have options ready than scramble after the fact.
Acting sooner rather than later: If you’re thinking about gifting shares or starting succession planning, the political uncertainty around BPR is one more reason not to delay.
The reality check
Nobody knows if or when BPR might be changed. But given how much revenue it costs the government and how politically tempting it is to target “business owners,” it’s naive to assume it’ll be around forever in its current form. The businesses that weather these changes best are the ones that plan for multiple scenarios rather than betting everything on one tax relief staying exactly as it is. Your business represents years of work, stress, and probably a fair chunk of sleepless nights. Don’t let poor succession planning mean it ends up benefiting HMRC more than your family. If BPR is part of your inheritance planning, now’s the time to make sure you understand exactly how it works and what happens if it doesn’t.
