Recent government changes to tax rates and thresholds are likely to impact all of your clients over the next few years.

Along with freezes to the Lifetime Allowance and the Personal Allowance, both the nil-rate band (NRB) and the residence nil-rate band (RNRB) for Inheritance Tax (IHT) were frozen in the chancellor’s March Budget.

The nil-rate bands will remain at their current levels of £325,000 and £175,000, respectively, until at least 2026. As share and house prices continue to rise, more estates will become liable for IHT, paid at 40% on the value of a deceased’s estate that exceeds these threshold amounts.

This could leave your clients’ loved ones with a massive IHT liability, but business owners could benefit from additional protection in the form of Business Relief (formerly Business Property Relief).

Keep reading to find out how Boolers’ expert financial planners could help your clients make the most of this relief to manage their business and their estate as tax-efficiently as possible.

Business Relief is available at 50% or 100% on certain assets

Your client’s business, or the shares they hold in a business, forms part of their estate for IHT purposes, but Business Relief reduces the value of those business assets when calculating how much IHT is due.

Business Relief of either 50% or 100% is payable on certain business assets, which can be passed on during your client’s lifetime or on death, via their will.

A Business Relief claim can be made on property and buildings, unlisted shares, and machinery, for example.

Your clients could receive 100% Business Relief on:

• A business or interest in a business
• Shares in an unlisted company.

Business Relief at 50% is available on:

• Shares controlling more than 50% of the voting rights in a listed company
• Land, buildings, or machinery owned by the deceased and part of a business they were a partner in or controlled
• Land, buildings, or machinery used in the business and held in a trust that it has the right to benefit from.

This means that your clients could pass on 100% IHT relief on their business on death, in some circumstances.

It is worth noting that relief is only available if the deceased owned the business or asset for at least two years before they died.

Gifting business assets

Your clients can give away business property or assets during their lifetime and the estate will still receive Business Relief on IHT for qualifying property or assets.

To retain the relief, the property or assets must remain a going concern until the death of the donor.

The recipients can replace property or assets for others of equal value, for business use. They will only get relief if the donor owned the business or asset for at least 2 years before the date it was given.

The gift will stop being liable for IHT on death more than seven years after the gift is made. There may, though, be Capital Gains Tax or Income Tax to pay if your client or the recipients of your client’s gift dispose of an asset and make a profit.

Business Relief isn’t available for a business where more than half of it is directly involved in:

• Dealing in stocks and shares
• Dealing in land or buildings
• Making and holding investments.

Boolers can help your clients understand the potential benefits of Business Relief

Understanding Business Relief could help your business-owner clients to better manage their estate and to lessen the IHT liability of the loved ones they leave behind.

Including a business in their estate planning could help clients who are reluctant to give cash gifts during their lifetime or want to hang on to their non-business wealth to cover the potential costs of later life care.

At Boolers, our team of expert financial planners can take a holistic view of your clients’ finances and help to put a retirement and estate plan in place that is tax-efficient, while helping your clients attain their long-term goals.

Having up-to-date estate planning – whether it includes Business Relief or not – gives peace of mind to your clients and a sense of control.

Get in touch

If you have clients who would benefit from expert financial advice, please get in touch. Email enquiries@boolers.co.uk or call 0116 240 7070.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.