AIM Shares and Business Relief
For years, shares listed on the Alternative Investment Market (AIM) were one of the most popular ways to reduce inheritance tax. Held for two years, a portfolio of qualifying AIM shares sat outside the estate entirely, at 100% Business Relief, while still giving investors exposure to growth. The rules changed on 6 April 2026. AIM shares now attract only 50% relief, and the mathematics of AIM investing for inheritance tax has changed with them.
Business Relief in Brief
Business Property Relief (BPR) removes qualifying business assets from the inheritance tax calculation, at either 100% or 50%. It exists so that a family business does not have to be sold to pay inheritance tax. The rules are explained in full in our guide to passing on a family business.
The assets that qualify include:
- A sole trader’s or partner’s interest in a business
- Shares in an unquoted trading company
- Land, buildings or machinery used by a trading business
Shares in a company quoted on the main market of a recognised stock exchange do not qualify. AIM is not a recognised stock exchange for this purpose, which is why AIM shares were treated as unquoted and qualified for relief.
What Changed in April 2026
From 6 April 2026:
- AIM shares no longer qualify for 100% relief. They are reduced to 50% relief across the board, whatever their value.
- The shares do not count against the £2.5 million combined allowance for 100% agricultural and business relief, because they never receive 100% relief.
- The reduced rate applies to shares held directly and to AIM shares held within an ISA.
The practical effect is that an AIM portfolio now carries an inheritance tax charge of 20% on death (50% of the normal 40% rate), where it previously carried none. For an investor with a £1 million AIM portfolio, the difference is a £200,000 tax bill that did not exist before April 2026.
The £2.5 Million Allowance Still Applies to Other BPR Assets
The cap introduced on 6 April 2026 applies to the combined value of assets receiving 100% relief, principally shares in unquoted trading companies (outside AIM), partnership interests and qualifying agricultural property. Those assets still attract 100% relief on the first £2.5 million per person, with 50% relief above. AIM shares are caught by the lower 50% rate at all values, so they neither use up nor benefit from the allowance.
Why AIM Shares Were Popular
AIM portfolios offered three things at once: growth potential, income, and inheritance tax relief after a two-year holding period. Because the shares were unquoted for relief purposes, they sat outside the estate at 100% relief, and the portfolio could be held inside an ISA with no income or capital gains tax either. Unsurprisingly, AIM IHT portfolios became a standard recommendation for wealthier investors.
The Risks That Remain
AIM investing was never just about the relief. The same risks that existed before the rule change remain:
- Volatility. AIM shares are generally smaller, younger and more volatile than main-market shares.
- Relief risk. Whether a particular AIM company qualifies for BPR depends on its activities. A company that moves from trading into investment, or changes its business model, can lose its relief status overnight.
- Liquidity. AIM shares can be hard to sell quickly at a fair price, which matters for an asset your family may need to sell to pay tax.
- Concentration. An inheritance tax portfolio concentrated in a handful of AIM companies carries far more risk than a diversified portfolio.
Is AIM Investing Still Worth It?
The case for AIM shares as an inheritance tax tool is now much weaker. With only 50% relief, the inheritance tax saving must be weighed honestly against volatility and liquidity risk. For many investors, the 20% tax charge is simply the price of holding riskier assets, and the relief no longer compensates for it.
Alternatives worth considering:
- Passing shares to the next generation under the seven-year rule, so the growth happens outside the estate
- Direct investments in unquoted trading companies, which still attract 100% relief up to the £2.5 million allowance
- Life insurance written in trust to cover a known inheritance tax liability on liquid assets
- Revisiting the overall estate plan, because the AIM position rarely exists in isolation
Practical Points
- Check every holding. Not every AIM company qualifies for BPR, and the qualifying position can change as a company’s activities change. A portfolio built on the old 100% assumption should be rechecked against the current rules.
- Model the tax. Use our inheritance tax calculator to estimate the charge on an AIM portfolio and how it interacts with the rest of the estate.
- Take advice. AIM IHT portfolios were always a specialist recommendation. The post-April 2026 rules make independent, current advice more important, not less.