Inheritance Tax on Limited Company Shares: Business Relief After April 2026

Yes. Your shares are valued at market value and added to the rest of your estate. Business Relief then reduces that value, before the nil-rate band of £325,000 and any residence nil-rate band are applied. Executors claim the relief on form IHT400 with schedule IHT413.

• Unlisted trading companies, including most owner-managed limited companies.
• You must normally have owned the shares for at least two years.
• Not companies that mainly deal in securities, land or buildings, or make or hold investments. Most buy-to-let and property-holding companies fail this test.
• Not companies being sold under a binding contract or being wound up, with limited exceptions.

Assets not needed for the business, including surplus cash, can be excluded from relief.

Executors must claim the transferred allowance by the later of 4 years after the death or 6 months after they start acting.

Qualifying gifts made on or after 30 October 2024 use the allowance first if you die within seven years. If the first spouse died before 6 April 2026, the full £2.5 million is treated as available to transfer. Tax on qualifying business property can be paid in 10 equal annual instalments, interest-free.

Yes. A gift to an individual is usually a potentially exempt transfer, so it falls outside your estate if you survive seven years. For Capital Gains Tax, a gift counts as a disposal at market value, but gift holdover relief can often defer the gain on shares in an unlisted trading company. The transfer is recorded on a stock transfer form and in the company's register of members.

If you die within seven years of the gift, Business Relief only applies if the recipient still owns the shares and they still qualify, for example the company is still trading and unlisted.

1. Is the company clearly trading, or has investment or property activity crept in?
2. Roughly what are your shares worth, and is your combined business property near £2.5 million?
3. Is cash building up that the business does not need?
4. Do your will, articles and shareholders' agreement say what happens to your shares?
5. Would gifts during your lifetime, or holdings with a spouse, use the allowances better?

LimitedCompany.Accountants reviews your company's trading status, cash and share structure and works with your solicitor or IFA on succession. Get a quote or book a call or ring 020 3441 1258.