Business Relief and Trusts After 2026: What Still Works for IHT?

Business Relief (BR) remains a legitimate route to mitigate Inheritance Tax, allowing qualifying business assets—such as certain unquoted shares or managed BR portfolios—to reduce or eliminate IHT after two years of ownership. However, reforms from 2026 are expected to be less generous than the recent past, changing the balance of risk and reward.

Where BR can be effective

BR is most appropriate where there is tolerance for illiquidity and volatility, a multi-year horizon, and a clear intention to hold assets through life, not just as a last-minute maneuver. For some families, allocating a slice of the estate to BR exposure complements other planning by rotating value into assets that may be IHT-efficient while remaining in the owner’s name.

Risks and realities

Qualification is not automatic. The underlying companies or portfolios must meet HMRC criteria on trading status and asset composition; too much cash or non-trading activity can threaten eligibility. Prices can move significantly; in stressed markets, selling quickly can be difficult. That’s why manager selection, diversification, and a sober view of exit routes matter as much as the headline tax treatment.

Trusts: control, timing and moving growth outside the estate

Trusts solve different problems than BR. A loan trust can freeze the value of what is lent in the settlor’s estate while shifting future growth to beneficiaries. A discounted gift trust can reduce the immediate transfer value for IHT by carving out a right to withdrawals for life. A discretionary trust places future decision-making with trustees for a class of beneficiaries, allowing distributions at appropriate times. All sit within the relevant property regime, which brings potential entry, periodic and exit charges—the trade-off for control and flexibility.

How BR and trusts fit the 2027 pension change

As unused pension funds enter the IHT net, some families will seek to reduce future exposure while keeping investment flexibility and control. BR and trusts can help—if they are aligned to clear objectives, documented properly, and integrated with income sequencing, gifts from income, and insurance in trust. Cross-border or highly engineered combinations (e.g., preference shares, annuities, and BR exposure via offshore entities) require robust legal and tax opinions and genuine commercial substance.

A pragmatic message

Neither BR nor trusts are “one-size-fits-all.” They are precision tools, best used to solve specific family objectives—succession for a business, protection for younger beneficiaries, timing of gifts—rather than as generic wrappers. In a post-2026/2027 landscape, the winners will be plans that are commercial, documented, and reviewable.