8.6 Inheritance tax

8.6 Inheritance tax

Shares in unlisted companies qualify for business relief from inheritance tax, where these shares have been passed on during a person’s lifetime or as part of their will. 

[This section has been updated 26/11/2025 and is subject to Government budget changes.] 

Withdrawable shares in societies are treated in the same way as unlisted company shares for inheritance tax purposes, so can be awarded Business Property Relief if the shares have been owned for at least two years (and meet other qualifying criteria set by HMRC and legislation from time to time). 

Business relief from inheritance tax may extend to withdrawable shares in societies, if the society is engaged in a trade which is it is carrying on for the purposes of making a gain.   

From April 2026, there will be a combined limit/allowance of £1 million for both agricultural and business assets that each person will have for their estate. This means that across all the business assets (including community shares) and agricultural property that a person owns that is eligible and meets the criteria for 100% inheritance tax relief, only the first £1million will benefit from having 100% relief (i.e. be free of any inheritance tax). The value of any business and agricultural property in an estate exceeding this £1million limit will qualify for 50% relief.  

Whether community shares are eligible for business relief depends on the nature of the activities of the society and whether these meet the specific HMRC and legislative criteria to be eligible for the relief. Evidence of the activities will be expressed in the objects of the society, and in its behaviour, for instance, through the payment of interest on share capital. Business relief is not available if the trade of the society is carried on otherwise than for gain; this might apply to some charitable community benefit societies or societies that have stated an intention never to pay interest on share capital. (For detailed guidance see HMRC Inheritance Tax Manual). 

It is recommended that investors seek independent financial advice from a tax expert if relying on community shares to provide Inheritance Tax relief for an estate. Particular care should be taken due to the strict nature of HMRC rules and the operation of the law, as against the nature of a Community Benefit Society which could present problems for the eligibility for business relief. Personalised advice from a specialist adviser should always be sought. 

Changes from 6 April 2026 update: https://www.gov.uk/government/publications/agricultural-property-relief-and-business-property-relief-reforms/summary-of-reforms-to-agricultural-property-relief-and-business-property-relief