Your guide to UK inheritance tax and trusts 12 Tax reliefs Owners of businesses are eligible for certain tax reliefs, depending on the type of business. Type of relief Amount of relief Business property relief Interest in a business as a sole trader or partner 100% Controlling interest in a quoted company 50% Holding shares in Alternative Investment Market 100% Unquoted shares 100% Certain assets used by a company which the owner controls or by a partnership in which the owner is a partner 50% Certain trust property used by a life tenant (a beneficiary with a life interest in a trust) in his or her own business 50% Agricultural property relief Agricultural land and certain buildings – With vacant possession or ability to vacate within 24 months 100% – Let on a tenancy beginning on or after 1 September 1995 100% – Let on a tenancy beginning before 1 September 1995 50% Example If the owner of a business worth £500,000 sold it to finance his retirement instead of using his other investments, as he wants to ensure a legacy for his children, but died shortly afterwards, the £500,000 proceeds would automatically be included in his estate. If the rest of his estate was worth £500,000 (utilising his nil-rate and residence nil-rate bands) 2020/21 tax year then, at current rates, the IHT bill would be £200,000 (£500,000 x 40%). However, if the owner passed the business (as opposed to investments) on death to his children, there would be no IHT liability, as it would be covered by business property relief. In many instances, a business transfer on death is completely free from any IHT liability. The main tax reliefs, which are subject to minimum periods of ownership, are set out below. Please check with your financial adviser regarding the period of ownership and whether the asset qualifies for the relief. The increase in these tax reliefs has led many business owners to believe they no longer face an IHT problem. Although their problem may have been reduced, it may not be eradicated entirely. At retirement, many owners sell their businesses rather than pass them on. However, once a business has been sold, any business property relief is lost and the money raised from the sale will form part of the estate. This can cause a significant increase in the potential IHT liability.