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Wills and Tax Planning

Wills and business property relief

Business owners may wish to leave their business assets to family members.

If you own shares in a private company, are a partner in a partnership or are a sole trader, you can make a gift of your business assets in your will free of inheritance tax, provided they attract business property relief (BPR). BPR is a relief from inheritance tax available for certain business assets which allows you to make gifts of them under your will, or during your lifetime, free from inheritance tax or at reduced inheritance tax rates. You can plan for further tax savings by employing particular BPR tax strategies in your will. These can produce potentially very significant reductions in inheritance tax.

A company shareholding, a partnership share or a sole trader’s business will qualify for BPR if:

  • It has been owned for two years before the date of death or a lifetime gift;
  • It is not subject to a binding contract for sale a the date of death/gift; and
  • It is not one that mainly owns properties or investments that provide rental or investment income.

To maximise the benefit of any BPR it is essential to take advice when preparing your Will and to consider the effect of any proposed changes to your business on this tax relief so that you don’t inadvertently prevent the application of BPR.