Inheritance Tax (‘IHT’) is charged on the value of the items and money you leave to your beneficiaries when you die. Some of your assets are free from this tax (see below) but those that are not will be taxed at 40%.
Anything left to your spouse or civil partner should be exempt from Inheritance Tax. However, if you are leaving your estate to other beneficiaries, it is only the first £325,000 of your assets that are free from Inheritance Tax: this is known as the ‘individual nil rate band’. In addition, there may be a further ‘residence nil rate band’ which can apply to the value of a family home in certain circumstances. This ‘residence nil rate band’ is currently £175,000. Both the ‘individual nil rate band’ and the ‘residence nil rate band’ thresholds are frozen at these levels until at least 2030.
In April 2024, HMRC reported that IHT receipts for the 2023/24 tax year were a record £7.5bn. Following the changes introduced in the October 2024 Budget, the OBR (Office of Budget Responsibility) predicted this will increase to an annual figure of £13.9bn for the 2029/30 tax year.
Business Relief (formerly known as Business Property Relief) was introduced in 1976, as a way of encouraging investment into certain trading businesses and to prevent them being broken up in order to pay Inheritance Tax. Business Relief reduces the value of a business or its assets when working out how much Inheritance Tax has to be paid.
If you leave shares that qualify for 100% Business Relief to your beneficiaries and have owned them for at least two years at the time of your death, no Inheritance Tax should be due on the value of those shares. However, not all businesses or business assets will qualify for Business Relief. Even where such relief is available, it may also only be available at 50% rather than 100%.
From 6th April 2026, the rate of Business Relief (‘BR’) available will depend upon the shares held and also the value of your estate.
- Where the total value of BR and Agricultural Property Relief (‘APR’) qualifying assets in an estate exceeds £1m, only the first £1m will obtain relief at 100% with the balance obtaining relief at 50%.
- Regardless of the total value of these qualifying assets, any shares in companies quoted on the Alternative Investment Market (‘AIM’), and other junior markets which are not designated as recognised stock exchanges (e.g. Aquis), will only obtain Business Relief at 50%.
Business Relief is assessed by HMRC on a case-by-case basis and only when the investor dies. It is not possible to guarantee qualification in advance nor obtain any form of “advance assurance” that it will apply.
Rest assured that any shares issued under the Seneca IHT Service are not quoted on any market and should therefore be available to form a part of your £1m ‘allowance’ on which you receive 100% Business Relief, assuming that you have owned them for at least two years at the time of your death and the usual other BR qualification criteria are met.
If you are a financial adviser, please contact your Seneca Relationship Manager on 01942 295 985 or at tellmemore@senecapartners.co.uk to find out how we can help.
If you are an investor, please speak to your financial adviser or contact our Client Team on 01942 295 985 or at clientteam@senecapartners.co.uk.
Please note that we do not offer tax advice.