Inheritance Tax and Commercial Property

Commercial property forms part of your estate for inheritance tax, and a common misconception is that Business Property Relief will shelter it. Usually it will not.

The starting point

Commercial property you own is part of your estate and can be taxed at 40% above the nil-rate band on death. Property held in a company means the company shares are in your estate; property held personally means the property itself is.

Business Property Relief is usually not available

BPR can give relief on business assets, but it is not available where the business is wholly or mainly one of holding investments. A let commercial property is generally an investment, so BPR does not normally apply. Landlords who assume their commercial portfolio is IHT-free through BPR are often mistaken; take advice on your specific position.

ATED targets residential, not commercial

The Annual Tax on Enveloped Dwellings (ATED) is sometimes raised as a worry. ATED targets high-value residential property held in companies. It does not apply to commercial property, so a company holding commercial premises is outside ATED.

The SIPP change from 2027

If you hold commercial property in a pension, note that from 6 April 2027 unused pension funds, including SIPP-held commercial property, are expected to be brought into the estate for IHT. See SIPP and the 2027 IHT change. Estate planning around commercial property is specialist work, so use a qualified adviser.

Does Business Property Relief apply to let commercial property?

Usually not. BPR is not available where the business is wholly or mainly holding investments, and a let commercial property is generally an investment.

Does ATED apply to commercial property?

No. The Annual Tax on Enveloped Dwellings targets high-value residential property held in companies, not commercial property.