A worked example
The parent owns 100% of an unlisted trading company worth £4 million, has owned it for more than two years, and the company holds no investments or other non-business assets. There is no unused allowance from a late spouse or civil partner to transfer. The parent's other assets use the £325,000 nil-rate band, and the residence nil-rate band, which tapers away from £2 million, is taken as nil for an estate of this size, so neither reduces the tax on the company.
| A death in 2027/28 | Before the Budget | After the Budget | Difference |
|---|---|---|---|
| Value of the shares | £4,000,000.00 | £4,000,000.00 | |
| 100% business relief on the first £2,500,000 | −£2,500,000.00 | −£2,500,000.00 | |
| 50% relief on the remaining £1,500,000 | −£750,000.00 | −£750,000.00 | |
| Chargeable value | £750,000.00 | £750,000.00 | |
| Inheritance tax at 40% | £300,000.00 | £300,000.00 | £0.00 |
| Or by 10 equal annual instalments, interest-free | £30,000.00 a year | £30,000.00 a year | £0.00 |
| If instead the shares were the whole estate, with the £325,000 nil-rate band free | £170,000.00 | £170,000.00 | £0.00 |
| If a late spouse's unused £2.5 million allowance transferred (up to £5 million in all) | £0.00 | £0.00 | £0.00 |
When it takes effect
Nothing changes for business relief or the nil-rate bands. Two inheritance tax measures in the Budget sit beside this example without changing it: a rule on liabilities in trust arrangements, for deaths and other events from 28 October 2026, and administrative changes for unused pension funds, which come into the estate from 6 April 2027 under Finance Act 2026.
Who it doesn't affect
Families whose company shares are held directly, as here: the Budget did not change business relief, its £2.5 million allowance or the nil-rate bands. The trust measure is about when liabilities relating to trust property reduce the value of assets for inheritance tax, not about shares held directly.
Where this comes from
- Budget 2026: Overview of Tax Legislation and Rates (HMRC), Annex A, Inheritance Tax: 40% rate, £325,000 nil-rate band, £175,000 residence nil-rate band tapering from £2 million, and the £2.5 million allowance for 100% agricultural and business property relief, for 2026/27 and 2027/28
- Budget 2026 (HM Treasury), Table 6.1 (policy decisions): no measure on business relief or the nil-rate bands
- Budget 2026: Overview of Tax Legislation and Rates (HMRC), section 1.26: liabilities in trust arrangements, for deaths and other events on or after 28 October 2026; section 1.27: unused pension funds within the estate from 6 April 2027
- Business Relief: what qualifies (GOV.UK): from 6 April 2026, 100% relief on the first £2.5 million, 50% above; a spouse's unused allowance can transfer; two years' ownership
- Agricultural property relief and business property relief changes (policy paper, updated 3 March 2026): inheritance tax on qualifying property payable in 10 equal annual instalments, interest-free
- How Inheritance Tax works (GOV.UK): 40% above the nil-rate band
Every figure on this page comes from the Budget documents published on GOV.UK on , and was checked by Alan Davidson FCA. Last updated . It is general information, not advice on your own position.