Business relief is now being used by the majority of wealth managers and financial advisers as an inheritance tax (IHT) planning tool for clients, according to new research.

It’s popular in estate planning because it offers potentially a faster route to IHT relief.

That's because business relief requires only two years to gain IHT exemption instead of seven years with gifting or trusts, said estate planning solutions provider Time Investments, the company behind the research.

It showed that 12% of advisers recommend business relief at least once a month as their preferred IHT solution for clients, with a further 34% recommending it every three months.

It means that almost half of advisers surveyed are recommending business relief at least once a quarter with the majority - 76% - using it up to twice a year.

The findings came as IHT receipts hit a record £6.1bn for the most recent tax year 2021/22, an increase of 14% on the previous year and the largest single-year increase in five years.

With the Office of Budget Responsibility predicting that the trend will continue, inheritance tax has become a concern for many families already under pressure from the rising cost of living crisis, Time said.

But despite its effectiveness as an estate planning tool, analysis of Government data showed that the use of business relief as an IHT exemption has fallen.

Only £1.9bn of business relief exemption was claimed by 2,820 estates in the 2019/20 tax year, down from £2.5bn claimed by 3,240 estates in the previous year. It means many investors may be missing out on this valuable tax exemption, Time said.

Henny Dovland, Time Investments’ IHT technical specialist, said: “The popularity of business relief as an estate planning tool is growing because it offers investors a faster route to IHT relief than gifting or trusts.  However, although many advisers are writing business relief business, it is still an under-utilised opportunity, despite offering tangible value to client outcomes.”

The business’s IHT planning service TIME:AIM is now available through the investment platform Transact.