Property and Investments: The Assets With No Inheritance Tax Relief
depends on how many years you have.
Where the reliefs stop
Business Property Relief covers shares in unquoted trading companies, sole trader businesses and partnership interests. Agricultural Property Relief covers qualifying farmland. Neither covers investment assets. A portfolio of let properties, a stocks and shares account, investment property held inside a company — all sit fully in the estate.
The same assets also carry capital gains tax at the main rates if you sell in your lifetime. There is no relief on the way out, and none on death.
ISAs: tax-free, until the one that counts
ISAs are free of income tax and capital gains tax. They are not free of inheritance tax. A £500,000 ISA built up patiently over decades is, on the face of it, £200,000 of inheritance tax on death — subject to the nil-rate bands available to the estate.
This catches people out, because "tax-free" has been doing a lot of work in the marketing. It is worth knowing before you assume the ISA is the efficient part of your estate.
Pensions join the list in April 2027
From 6 April 2027, most unused pension funds and death benefits come into the estate for inheritance tax. For anyone who has been treating the pension as the last thing to spend and the best thing to leave behind, that reverses a long-standing planning assumption — and there is less than a year to think about it.
Property held personally: moving it into a company
Owners of personally held portfolios often want the assets inside a company: for the corporate tax rates, for the ability to retain profits, and as the foundation of a family structure. There are two routes, and neither is a default.
The partnership route, using incorporation relief
Run the portfolio as a genuine partnership business for a period, then incorporate it. Section 162 incorporation relief can roll the gain into the shares you receive rather than triggering capital gains tax on the transfer.
Two points matter. HMRC expects a real business being carried on, not a passive holding with a partnership label attached. And for transfers on or after 6 April 2026 the relief must be actively claimed through the self assessment return, with details of the transaction — it no longer applies automatically once the conditions are met.
Direct incorporation
Transfer the properties, pay the capital gains tax and stamp duty land tax now, and accept the cost. The upside is a director's loan account equal to market value, which can be drawn down free of further tax as rental profits accumulate. It is rarely elegant. It is sometimes the right answer once the numbers are run.
Trusts
They move income-producing assets towards the next generation without handing over control.
They protect assets, because beneficiaries do not own them outright.
Around £325,000 per person can go in without an immediate lifetime charge, and that allowance refreshes every seven years.
They carry their own ten-yearly and exit charges, so they need modelling rather than assuming.
They suit people with time — several seven-year cycles is where the value builds.
The arithmetic of leaving it late
Take a £5 million property portfolio with no reliefs available. Before nil-rate bands, that is roughly £2 million of inheritance tax. Removing that much value from an estate is not one transaction — it is ten, fifteen or twenty years of gifts, trusts and structure working together.
Which is why the honest answer to "when should we start" is almost always "earlier than this". Health and time are the real constraints, not cleverness.
A word on unmarried partners
The spouse exemption applies to married couples and civil partners. It does not apply to long-term partners, however long-term, and there is no workaround inside the tax system. The practical options are a civil partnership, which some couples find a smaller step than marriage, or life insurance written in trust to fund the bill.
What to do now
List what you own that attracts no relief — property, ISAs, investments, and from April 2027 the pension.
Get it valued properly rather than estimated.
Work out the exposure above the nil-rate bands available to your estate.
Test whether the property portfolio is genuinely a business, because that changes the routes open to you.
Decide how many years you realistically have, and plan to that.
Rates and thresholds are those applying for the 2026/27 tax year and can change.
Flow works with landlords and investors on inheritance tax exposure, incorporation and long-term structuring — including working out what a portfolio would actually cost to pass on. If you would like to talk it through, book a free, no-obligation discovery call with one of our tax team.
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