the 8086 system to have a much larger set of operational instructions and can make calculations to more significant places.the 8085 processor does have two 16-bit registers. The pointer and the program counter.
8085 is a 8-bit processor and no segment register and consist of 16-bit address lines and 8-bit data bus. therefore,2^16=64KB memory location 8086 is a 16-bit processor and four 16-bit segment register and also 20-bit address line and 16-bit data line therefore 2^20=1MB memory location
8086 was the first microprocessor which was upward compatible. It means the application which is supporting 8086 microprocessor will support it's higher versions like 80286,80386, Pentium etc. and 8085 was not the upward compatible. This is the main difference.