A business owner can often pass on their company free of inheritance tax. A landlord with a portfolio of similar value usually can't.
Why landlords miss out on business relief
Business relief is for trading businesses. HMRC treats letting property as an investment, so rental properties, and shares in a company that mainly holds them, usually don't qualify, however much work goes into running them.
The result
Everything above the allowances (£325,000 per person, plus up to £175,000 for a home left to children, all frozen until 2031) can be taxed at 40%. Families sometimes have to sell properties quickly to pay.
Planning takes time
There are ways landlords plan, from how property is owned to lifetime gifts and trusts, but many involve capital gains tax, stamp duty or a seven-year wait. Starting early gives you more options.
What could your family face? Try the landlord inheritance tax calculator or speak to a specialist.
Frequently asked questions
Do rental properties qualify for business property relief?
Usually not. Letting is generally treated as an investment activity, so rental properties and shares in a property investment company don't qualify.
Can I give properties to my children?
You can, but gifting property can trigger capital gains tax, and you need to survive seven years for the gift to fall fully outside your estate. You also can't keep benefiting from the rent.
Does the residence nil-rate band apply to rental property?
No. It only applies to a home you've lived in, passing to direct descendants.
Request a call back
Tell us a little about your situation and we'll call you, usually within one working day, to understand what you need. If it would help, we'll then put you in touch with a landlord tax specialist. We'll always tell you who they are before passing on your details. We don't give advice ourselves, and there's no obligation.