A company report with a pair of glasses on it

Business property relief and company cash

7 min read · 24 September 2026 · Written for business owners

£2.5 million
of qualifying business and agricultural property in an estate gets 100% relief from 6 April 2026, with 50% on the value above that
Finance Act 2026

What business property relief does

Business property relief reduces the inheritance tax due on a business, or on shares in an unquoted trading company. From 6 April 2026 business property relief is 100% on the first £2.5 million of qualifying business and agricultural property in an estate and 50% on the value above that, which is an inheritance tax rate of 20% on the excess (Finance Act 2026). Unused allowance can be transferred to a spouse or civil partner, and the tax on business property can be paid in up to ten equal annual instalments, interest-free (Finance Act 2026).

100%
relief on the first £2.5 million of qualifying business and agricultural property in an estate
50%
relief on the value above that, which is an inheritance tax rate of 20% on the excess
10
equal annual instalments, interest-free, for the tax on business property

Finance Act 2026.

The relief applies to the value of the business. Some assets held inside the company can be left out of it.

Excepted assets

An asset is left out of the relief if it was not used wholly or mainly for the business throughout the two years before the transfer, and was not needed at that time for the future use of the business. The legislation calls this an excepted asset (Inheritance Tax Act 1984, section 112).

HMRC’s Shares and Assets Valuation Manual (SVM111210) tells its valuers to examine carefully whether cash, bank accounts, building society accounts and similar assets in a company’s accounts are excepted assets.

How HMRC looks at it

HMRC’s manual (SVM111220) says surplus cash beyond the present and future needs of a trading business is an excepted asset. The question is whether the company needs the cash, now or for a purpose it can show.

There is no threshold

There is no fixed figure or percentage of turnover in the legislation. The test is whether the cash is more than the business reasonably needs, and that depends on the facts of your company.

What makes cash defensible is evidence that it has a purpose:

  • A stated policy about how many months of overheads the company holds, and why.
  • Capital expenditure that has been budgeted, with dates and figures.
  • A contractual or regulatory requirement to hold funds.
  • A history of the balance going down as well as up.

A general intention to invest at some point, a statement that the sector is cyclical with nothing to show for it, or money described as a reserve only after the event is not evidence of a purpose.

A balance that has risen every year with no written reason for it has no evidence of a purpose. The question is whether there was a business reason for the amount, and whether that reason was written down at the time.

A business owner at the counter of their shop

The same cash affects relief on a sale

18%
business asset disposal relief on qualifying gains, for disposals from 6 April 2026
£1 million
the lifetime limit for business asset disposal relief
20%
of turnover, assets, expenses or time, the marker HMRC uses for substantial non-trading activities or assets

gov.uk, Business Asset Disposal Relief; HMRC Capital Gains Manual CG64090.

Business asset disposal relief on a sale of the shares depends on the company being a trading company. HMRC treats a company with substantial non-trading activities or assets as not trading, and uses 20% of turnover, assets, expenses or time as its marker (HMRC Capital Gains Manual CG64090). Business asset disposal relief taxes qualifying gains at 18%, up to a lifetime limit of £1 million, for disposals from 6 April 2026 (gov.uk, Business Asset Disposal Relief).

One cash balance can therefore affect the tax on a sale and the tax on death.

Questions and answers

Does taking the cash out solve it?

Taking it out as salary or dividend creates a personal tax charge, and the money then sits in your own estate, where it gets no business property relief. Whether that leaves you better off depends on your position as a whole.

Does a group structure help?

It can change which company holds the cash, and it has costs and tax consequences of its own. Your accountant can look at whether it is relevant to you.

What if the company owns property it does not trade from?

Let property is an investment asset. It raises the same excepted-asset question, and it also counts towards the non-trading activity that can cost the company its trading status for relief on a sale.

Do I need to do anything now?

Writing down why the company holds the cash it holds, and updating that each year, is the evidence the excepted assets test turns on. Whether anything else is needed depends on your circumstances.

What to do next

  1. Ask your accountant how much of the company’s cash, in pounds, they would regard as more than the business needs, and whether that amount is large enough to raise the excepted assets question.
  2. If it is, the answer involves both company tax planning and your personal financial planning. A regulated financial adviser looks at the personal side alongside your accountant, and your accountant can introduce you.

This sheet explains how the rules work. It is not advice, and it does not take your circumstances into account. Your accountant can talk it through with you and can introduce you to a regulated financial adviser.