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Business Assets

Also known as: Company Assets, Business Property

Definition

Business assets are all property owned by or used in your business—including equipment, stock, intellectual property, and goodwill—that may qualify for inheritance tax relief when passed through your estate.

Understanding business assets is crucial for will-making because they face different tax treatment than personal assets and require careful succession planning to protect both business continuity and family inheritance.

What Are Business Assets?

Business assets encompass both tangible and intangible property used in your business. Tangible assets are physical items like equipment, machinery, stock and inventory, vehicles, and business premises. Intangible assets are non-physical property including intellectual property, patents, trademarks, goodwill (your business's reputation and customer relationships), customer lists, and brand value. Under the Inheritance Tax Act 1984, qualifying business assets may receive Business Property Relief reducing inheritance tax by 50% or 100% depending on the asset type.

What you actually own depends entirely on your business structure. Sole traders personally own all business assets—if you run a graphic design business as a sole trader, you directly own the computers, software licenses, and client contracts. In partnerships, partners jointly own business assets and the partnership agreement governs distribution. For limited companies, the company itself owns all business assets as a separate legal entity; you own shares representing ownership in the company, not the underlying assets. This distinction is fundamental because your will can only distribute what you legally own.

Currently, qualifying business assets receive generous tax relief: 100% relief for sole trader businesses, partnership interests, and unquoted company shares; 50% relief for business property used by a partnership or company. You must own assets for at least two years before death to qualify. However, from 6 April 2026, major changes take effect. The full 100% relief will be restricted to the first £1 million of combined business and agricultural property. Assets above £1 million receive only 50% relief, creating an effective 20% inheritance tax rate on the excess rather than the standard 40%. For a business worth £2.4 million, this means potential £280,000 tax liability instead of zero under current rules.

Common Questions

"What types of assets count as business assets in my estate?" Business assets include tangible items like stock, equipment, machinery, vehicles, and business premises, plus intangible assets like intellectual property, patents, trademarks, goodwill, customer lists, and brand value. For sole traders, you personally own all business assets. For limited companies, the company owns these assets while you own shares. Both tangible and intangible business assets can qualify for Business Property Relief reducing inheritance tax by 50% or 100%.

"Can I leave business assets separately from my personal assets in my will?" Yes, you can distribute business assets and personal assets to different beneficiaries. For sole traders, specify individual business assets like equipment or goodwill separately. For limited companies, your company shares are personal property you can gift to anyone regardless of who receives your house or savings. This separation is common when leaving a business to one child and personal assets equally among all children.

"What happens to my business assets if I die without a will?" Without a will, business assets pass under intestacy rules along with all your other property to your spouse or closest relatives. This can be disastrous for businesses as assets may be distributed to people with no business experience or interest in continuing operations. For partnerships, the partnership agreement usually takes precedence. For sole traders, the business ceases and assets are sold. Always make a will specifying who should receive business assets and how the business should be handled.

Common Misconceptions

Myth: "My business is a limited company, so I can leave the business assets to different people in my will."

Reality: When you own a limited company, you don't own the business assets—the company does. You own shares in the company, and it's these shares you leave in your will. If you own 100% of shares and leave them to one person, that person gets control of all the business assets. You cannot split up business assets owned by a limited company without selling them first or restructuring the company.

Myth: "All business assets automatically qualify for 100% inheritance tax relief, so I don't need to worry about tax planning."

Reality: Business Property Relief isn't automatic and varies by asset type. Only qualifying business assets get relief, and even then it's either 50% or 100% depending on the asset. Investment businesses don't qualify at all. From April 2026, there's a £1 million cap on 100% relief—business assets above this threshold only get 50% relief, meaning you could face a 20% effective inheritance tax rate on the excess. Business owners with significant assets need professional tax planning.

  • Intellectual Property: A specific category of intangible business asset including patents, trademarks, and copyrights that often represents significant value but requires specialist valuation expertise.
  • Company Shares: Represent ownership of a limited company's business assets; shares pass in your will rather than the underlying assets the company owns.
  • Partnership Agreement: Governs how partnership business assets are valued and distributed when a partner dies, typically including succession clauses and valuation mechanisms.
  • Business Succession: The broader planning process for transferring business assets and control to the next generation or new owners beyond just your will.
  • Online Business: Has distinctive business assets like domain names, social media accounts, and digital content that are often undervalued or overlooked in estate planning.

Need Help with Your Will?

Understanding your business assets is essential for creating a will that protects both your business and your family's financial security. Whether you're a sole trader, partner, or company owner, clearly addressing business assets in your will prevents confusion and ensures smooth succession.

Create your will with confidence using WUHLD's guided platform. For just £99.99, you'll get your complete, legally binding will plus three expert guides. Preview your will free before paying anything—no credit card required.

Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.