Recent changes to Business Relief (BR) rules have brought inheritance tax planning firmly back into focus for advisers and their clients.
The introduction of defined BR allowances and the prospect of pensions falling into scope from 2027 are reshaping conversations across the advice market. Individuals can now benefit from up to £2.5 million of assets qualifying for 100% Business Relief, with relief on qualifying holdings above that threshold reducing to 50%.
Crucially, the allowance is transferable between spouses and civil partners, allowing a combined £5 million to be sheltered at full relief. This shift brings BR more closely into line with other familiar tax allowances, such as the nil‑rate band or ISA allowances, and gives advisers a clearer reference point when structuring estate plans.
We at Tax-Efficient Investment (TEI) Magazine reached out to a range of experts to find out what their immediate reactions are to the changes.
Prashant Trivedi, Investment Analyst at MICAP from Defaqto, said:
“Based on MICAP’s conversations with investment managers and panel clients, as well as the data they provide, we are seeing increased interest and use of Business Relief (BR) investments from advisers.
“It is becoming far more mainstream than the niche strategy it was once considered to be. While advisers have long discussed ISA allowances with their clients, they should also be discussing Business Relief allowances too.
“The changes effective from 6 April will have two direct implications. The first is for clients holding AIM listed BR holdings and whether that is still appropriate for the client, with HMRC clarifying that the two-year qualifying period for full BR relief, below the allowance threshold, will reset for any transfers for AIM BR holdings into any assets expected to be qualifying for unlisted BR.
“The second is for those clients that are currently exceeding the Business Relief allowance limit at which point the relief drops to 50% from 100% and whether the whole estate is structured efficiently from a tax perspective in line with the client’s wishes.
“In addition to these existing changes, with pension assets falling into the remit of IHT from April 2027 advisers need to be factoring these upcoming changes into their client reviews and again looking at appropriate investments within appropriate structures for their clients and the beneficiaries especially for estates above £2 million which could see a reduce or elimination of the Residence Nil-Rate Band through the taper rules.”
Andrew Aldridge, Chief Operating Officer at Deepbridge Capital, said:
“The Government’s decision to amend Business Relief rather than abolish or severely curtail it is, on balance, a pragmatic outcome. Business Relief remains a cornerstone of inheritance tax planning and a relief that advisers must continue to consider for any client with potential IHT exposure.
“The original proposal to impose a £1 million hard cap would have materially undermined long‑term planning strategies and created unnecessary distortions. Rolling back from that position was sensible.
“The introduction of an effective “allowance” structure is, however, an important change. It makes Business Relief conceptually closer to other tax reliefs, such as pensions or ISAs, and creates a more tangible framing for adviser–client discussions.
“Rather than diminishing its relevance, this is likely to reinforce the need for earlier, more deliberate planning.
“In practical terms, we are already seeing advisers reassess asset allocation within BR‑qualifying portfolios. In particular, there is a clear and growing shift away from AIM exposure towards unquoted Business Relief propositions, driven both by risk management considerations and a desire for greater certainty around qualifying status. That trend looks set to continue over the next 12–24 months.
“More broadly, rising tax pressure across pensions, ISAs, buy‑to‑let property and wider wealth planning means tax efficiency will increasingly dominate advice conversations. Business Relief will be central to this, but it should not be viewed in isolation.
“Advisers should also be actively considering EIS, not only as a growth and diversification tool, but as an effective way to manage income tax and capital gains tax liabilities arising from portfolio rebalancing, while operating within a broader IHT‑efficient framework given EIS shares’ qualifying status for Business Relief.”
Kristy Barr, Co-Head of Retail at Octopus Investments, said:
“The upcoming changes to how pensions are treated for Inheritance tax relief is bringing estate planning back to the top of the agenda. Greater certainty around Business Relief enables families and advisers to focus on practical implementation and on reviewing plans in the round, rather than waiting on further announcements.
Over the next 12–24 months we expect a marked increase in conversations about how to mitigate inheritance tax while retaining control and access to capital. Business Relief can play an important role here, particularly for clients who want to stay invested and are comfortable with the higher-risk nature of smaller company investing and the need for a qualifying holding period.
For advisers, the impact is likely to be twofold: more demand for clear guidance and suitability-led advice, and greater reliance on robust, professionally managed solutions that help clients remain invested while targeting Business Relief eligibility. We anticipate continued interest in Business Relief-qualifying structures, as part of a well-rounded strategy alongside gifting and protection, tailored to each client’s objectives and risk appetite.”
Rebecca Ward-Howes, Head of Product at Downing said:
“The reforms to Business Relief (BR) that took effect on 6 April mark a significant moment, but not necessarily a negative one. The introduction of a recognised £2.5 million allowance, fully transferable between spouses and civil partners to create a £5 million combined exemption, is a meaningful development.
“Like the Nil Rate Band and Residence Nil Rate Band before it, this creates a clear, structured allowance that advisers and clients can plan around with confidence.
“Crucially, the Government’s decision to continue supporting Business Relief sends an important signal. BR remains a valued part of the UK’s tax framework, and because the allowance resets every seven years, couples can place £5 million into trust on a rolling basis, opening genuinely powerful long-term planning opportunities.
“We expect this to shift clients’ behaviour – BR has historically been associated with later-life planning. However, this new structure encourages clients to act earlier – in their 50s and 60s – when they have more time, more options, and more to gain from a considered approach to estate planning.
“Our message to advisers is clear: plan with confidence. The landscape has changed, but the opportunity is stronger than ever.”
Caroline Flagg, Strategic Partnership Director & Private Client Manager at PXN Investments, said:
“The Business Relief regime that took effect on 6 April is materially different from where the proposals started. The £2.5m allowance for 100% relief, transferable between spouses, is significantly more generous than the £1m originally proposed, and HMRC’s own estimate is that around 1,100 estates a year will pay more tax under the new rules. So the headline is genuine reform, not abolition.”
“Our immediate reaction is that BR remains a valuable planning tool, but the conversation with clients needs to be reframed around deliberate allocation rather than open-ended use. The split between 100% relief on qualifying unquoted assets within the £2.5m allowance, 50% relief on AIM shares, and pensions falling outside the regime entirely, means advisers are now choosing where BR exposure should sit rather than treating it as a single bucket.
“Over the next one to two years we expect to see two shifts. The first is greater scrutiny of AIM-based BR strategies, given they no longer count toward the 100% allowance. The second is renewed interest in unquoted, asset-backed BR strategies that sit cleanly within the new framework. With pensions also coming into the taxable estate from April 2027, BR is likely to become more, not less, relevant for clients with the right risk profile, sitting alongside gifting, life cover and trust planning rather than carrying the full weight of an estate plan on its own.”
Callum Gallacher, Business Development Manager at Beringea, the investment manager of the ProVen VCTs and ProVen Estate Planning Service (PEPS), said:
“While the changes to Business Relief (BR) from 6 April introduce some new constraints, they reaffirm the government’s continued support for BR as a core and highly valuable planning tool. The introduction of a £2.5m cap and 50% relief thereafter does not remove the attractiveness of BR – it simply makes how and where it is used more important.
“In the short term, I expect increased engagement from both advisers and clients. Rather than reducing demand, budget reforms are likely to accelerate conversations around estate planning, particularly for investors and clients who can still benefit from BR within the new framework.
“The two-year qualifying period, combined with retained inheritance tax (IHT) efficiency, continues to make BR one of the most flexible and accessible solutions available.
“Over the next 1-2 years, I see BR becoming more integrated into broader planning strategies rather than used in isolation. Advisers will need to think more carefully about how BR can be used in combination with trusts and other tax-efficient structures, but that creates opportunity rather than limitation.
“For many clients, BR will remain a cornerstone, particularly for those seeking control, speed of planning, and mitigation of IHT without giving up access to capital. Ultimately, the changes encourage better planning discipline, not less use of BR.”
Olivia Drinnan, Director of Advisor Fundraising at Haatch, said:
“The changes to Business Relief from 6th April are already shifting behaviour. From our side at Haatch, we’re seeing more conversations move towards EIS and SEIS, particularly where advisers are rethinking how clients approach inheritance tax planning.
“What’s changed most is the role of IHT relief available through the schemes, which when I started in the industry was seen as an additional perk. Now it’s often the starting point, particularly for clients with pensions earmarked for beneficiaries, where they are facing IHT on death and then further tax when funds are drawn.
“That double layer of tax is a key driver toward S/EIS, not just to reduce IHT exposure, but also to take advantage of income tax relief to offset the tax on pension withdrawals. It’s become a much more deliberate planning tool, particularly as S/EIS is the only product that offers both tax reliefs together (income tax relief and IHT relief).
Over the next 1 to 2 years, I expect this to continue. Advisers will need to be confident guiding clients through it, but demand for EIS and SEIS as part of the wider planning mix is clearly growing.
Jack Rose, Head of Distribution at Triple Point, said:
“The changes to UK inheritance tax this April represent the first stage in a series of reforms announced by the government, culminating in further changes next April when pensions are brought more fully into scope. Together, these signal a clear direction of travel: a tightening of reliefs and a broader push to bring more assets within the IHT net.
“For financial advisers, this creates a more complex and fast-moving planning landscape. Strategies that have served clients well historically may need to be revisited. As a result, regular reviews and a more dynamic approach to planning will become increasingly important.
“Advisers will be focused on stress-testing existing arrangements, revisiting assumptions around liquidity and control, and ensuring clients understand that IHT planning is as much about managing uncertainty as it is about minimising tax.
“At the same time, these changes create an opportunity to demonstrate value. Clients will need guidance on navigating evolving rules, balancing tax efficiency with flexibility, and avoiding unintended consequences in more complex estates.
“Ultimately, the focus is shifting from static tax planning to ongoing stewardship. Advisers who embrace that shift will be well placed to support their clients.”
Tom Mullard, Tax Business Line Director at TIME Investments, said:
“The changes to Business Relief (BR) are, in practice, more targeted than many initially expected. For most individuals, particularly those with more modest estates or existing BR holdings, there is little to no impact on their potential Inheritance Tax (IHT) bills or broader estate planning. The effect is largely concentrated among those with larger estates and those already holding more than £2.5 million in BR-qualifying unquoted shares (£5 million per couple), where the restriction has more of an effect.
“The impact has been more immediate in Alternative Investment Market (AIM) portfolios. The halving of relief has contributed towards sustained selling pressure over the past 18 months, which has further weighed on both performance and sentiment. This has prompted some reassessment of how AIM-based BR solutions are positioned within portfolios.
“From an adviser perspective, the introduction of a defined BR allowance has been a catalyst for further engagement with clients. It has brought BR further into the mainstream, driving a noticeable increase in client conversations and adviser interest. We’re already seeing higher volumes of enquiries, including from advisers who had not previously incorporated BR into planning strategies.
“Looking ahead, the more significant shift may come from pensions re-entering the IHT ’net’ in 2027. That is likely to expand the pool of clients facing inheritance tax exposure considerably, increasing demand for BR solutions. As a result, education, and estate planning tools, such as our online IHT calculator, will be invaluable for advisers to visualise the potential impact of any future scenarios to their clients.”
David Goodfellow, senior wealth planning director at Canaccord Wealth said:
“The original proposals announced in the 2024 Budget were vague, poorly thought through and incredibly expensive in practice. Advisers and business owners had to make major structural corporate decisions in the dark, particularly around the £1 million cap and the absence of clarity on spousal transfers.
“It also further undermined the Alternative Investment Market (AIM) which fared worse than business owners and investors in unquoted companies. All of this to a relief introduced in 1976 which has remained largely unchanged for nearly 50 years.
“As a result, farmers and small business owners, in particular, rushed into complex and costly restructuring simply to protect family businesses from punitive inheritance tax outcomes that would have forced asset sales or break-ups.
“Much of that planning has now been unwound following the government’s subsequent reversal to a £2.5 million allowance, transferable between spouses. For some families, this round trip has cost tens of thousands of pounds in professional fees, with no economic benefit whatsoever.
“The damage, however, runs deeper than wasted time and money. This episode has reinforced a growing perception that tax policy can shift without warning and without proper consideration of real-world consequences.
“Business owners, and those investors who have embarked on IHT planning, are already behaving more defensively, diversifying structures, taking money out of businesses, and planning for worst‑case scenarios rather than investing for growth. That is not a message that says Britain is open for business or has a Government focussed on growth, as it claims to be.”
Matthew Moynes, Director at Calculus Capital, said:
“The inclusion of pensions in a person’s estate as of April 2027 is one of the most impactful legislations changes to be introduced to IHT planning in recent years. Dove tailed with the material reduction in IHT relief available through AIM listed holdings, this will inevitably lead to a growth in popularity of private, unquoted Business Relief funds.
“With increased inflows into these funds, advisers should ensure a client’s estate planning portfolio is well diversified and not over exposed to specific strategies and sectors.
“As has become custom with experienced VCT investors, advisers should utilise the breadth and depth of strategies accessible across multiple BR providers to help spread and mitigate risk. Portfolio liquidity and valuation transparency should also be on the radar of advisers as more client money enters these funds.”
Matthew Brown, Partner at RAM Capital Partners LLP, said:
“My first reaction is that the reforms have been softened enough to avoid the feared collapse of the BR market, but not enough to leave adviser practice unchanged. The lift from £1m to a £2.5m transferable allowance means most family-business estates sit broadly where they were, but AIM BR portfolios are now structurally less attractive and the planning metrics for estates above £5m combined has genuinely shifted.
“Over the next 1–2 years I expect adviser behaviour to change more than product design. BR will stop being the default IHT answer and start being one lever among several — sitting alongside gifting, trusts, life cover and, importantly, the wider tax-advantaged universe of EIS, SEIS and VCTs which suddenly look more competitive on a relative basis.
“Advisers who historically used AIM BR as their first go-to solution will need to rebuild their process, and I’d expect greater scrutiny of manager-level evidence: cohort exit velocity, fee transparency, and genuine portfolio diversification with demonstrable trading substance.”
Steve Dobson, Head of Investments at GrowthInvest, said:
“The recent changes to Business Relief will provide the perfect opportunity for advisers to get back in front of their clients to review the impact and check that their current inheritance tax plans are still valid. For some it will be but for others the changes will require a review of the strategy previously put in place.
“Whilst AIM portfolios can still add a diversification element to the investments held to mitigate Inheritance Tax, the new lower 50% relief could point advisers and their investors to look to reallocate to other unlisted business relief assets that offer a full 100% relief.
“It’s not to say the role of AIM is over for estate planning, it is definitely not, but when looking at the best outcomes for clients when trying to protect an estate from the tax man, investment in the AIM market has definitely been delivered a disadvantage.
“We’ve already seen many unlisted Business Relief providers offering discounts, speedy deployment and insurance for the fall to 50% relief, looking to attract AIM investments, and there has also been innovation for higher-yielding unlisted BR funds.
“With more changes due in 2027, notably the inclusion of unspent pensions into the estate, early planning will be key, and a little time spent now to review a client’s position could make a significant positive difference in the longer run.
“At GrowthInvest we anticipate more BR business being written over the next 1-2 years as more estates fall into the IHT limits and our platform allows an adviser and investor to hold all of their BR investments, listed or unlisted, in one account.”
Hugi Clarke, Partner, Retail Sales at Foresight Group, said:
“The changes to Business Relief from 6 April represent evolution, not revolution, but they come at a time when demand for IHT solutions is surging. Our research shows nearly 90% of advisers are seeing an increase in IHT-related enquiries, and 72% expect planning to become significantly more important over the next year. Against that backdrop, any change to a popular planning tool will inevitably sharpen focus on how it is being used.
“In the near term, advisers are reassessing client strategies, particularly for larger estates, and revisiting how Business Relief sits alongside other options. That is likely to drive more detailed conversations around diversification, liquidity, and risk but the underlying behavioural dynamics remain unchanged. Only one in three clients is acting on the IHT advice they receive, often due to concerns over access and control.
“That is where Business Relief is likely to retain its appeal. Its ability to offer IHT mitigation within two years, while maintaining access to capital, continues to address one of the primary barriers to action.
“In the years ahead, we expect continued growth in the space, albeit with greater, and welcomed scrutiny of providers. With flows growing to over £2bn last year, and nearly two thirds of advisers using Business Relief as a solution, the direction of travel is clear. The changes may refine how BR is used, but they are unlikely to diminish its role in modern estate planning.”
You can read this article and more in ‘Reform, risk and opportunity: the new tax-efficient investment landscape‘, the latest issue of Tax-Efficient Investment (TEI) Magazine!
