AIM Shares and Inheritance Tax UK: Business Property Relief After the Budget 2024
Qualifying AIM-listed shares attract 100% business property relief (BPR) after a 2-year holding period — making them a popular IHT planning tool. But from April 2026, the Budget 2024 caps combined BPR and APR at £1 million. This guide explains how AIM shares are taxed, what changed, and how to adapt.
Budget 2024 change: £1 million BPR cap from April 2026
From 6 April 2026, the combined BPR and APR 100% relief is capped at £1 million per individual. AIM shares worth above £1 million (combined with any other BPR/APR assets) receive only 50% relief — an effective IHT rate of 20% on the excess. For portfolios under £1 million, BPR remains fully available.
How AIM shares qualify for BPR: the three conditions
1. Two-year hold
Shares must be owned continuously for at least 2 years before death. Buying AIM shares shortly before death does not qualify — HMRC will check the acquisition date.
2. Qualifying company
The company must be a qualifying trading company — not wholly or mainly dealing in investments, land, or shares. Most active AIM businesses qualify; investment vehicles and property funds do not.
3. No restriction
Shares must not be excluded from BPR — e.g., the company must not hold excessive 'excepted assets' (surplus cash or investments not used in the trade) that proportionately reduce the relief.
AIM shares and the £1m cap: before and after April 2026
| AIM portfolio value | IHT before April 2026 | IHT from April 2026 |
|---|---|---|
| £500,000 (all qualifying) | £nil (100% BPR) | £nil (within £1m cap) |
| £1,000,000 (all qualifying) | £nil (100% BPR) | £nil (at the cap) |
| £1,500,000 (all qualifying) | £nil (100% BPR) | £500,000 × 50% × 40% = £100,000 |
| £2,000,000 (all qualifying) | £nil (100% BPR) | £1,000,000 × 50% × 40% = £200,000 |
| £3,000,000 (all qualifying) | £nil (100% BPR) | £2,000,000 × 50% × 40% = £400,000 |
NRB (£325,000) and RNRB (up to £175,000) apply after BPR and would further reduce the IHT in the examples above. The table shows the IHT on AIM shares only.
FAQs
Do AIM shares qualify for inheritance tax business property relief?
Yes — shares listed on AIM (the Alternative Investment Market, part of the London Stock Exchange) can qualify for 100% business property relief (BPR) for inheritance tax, provided three conditions are met. (1) HOLDING PERIOD: the shares must have been owned by the deceased for at least 2 years immediately before death. BPR is lost if the holding period is shorter — if a person dies having owned AIM shares for only 18 months, no BPR is available. The 2-year period must be continuous ownership of the same shares (or replacement shares — there are provisions for replacement shares maintaining the clock). (2) QUALIFYING COMPANY: the company whose shares are held must be a qualifying trading company for BPR purposes. It must be carrying on a qualifying trade — broadly a business that is not wholly or mainly dealing in stocks, land, or making or holding investments. Most active trading companies on AIM qualify, but some will not. Companies that are essentially investment vehicles (e.g., property funds, investment trusts) do not qualify for BPR even if listed on AIM. (3) NOT EXCLUDED: certain assets of the company are 'excepted assets' that do not qualify for BPR — if the company holds excessive cash or investment assets not used in the trade, the relief is proportionately reduced. Most reputable AIM BPR managers screen for qualifying status. HMRC's POSITION: HMRC can challenge BPR claims on AIM shares. The qualifying status of a company is assessed at the date of death. A company that was qualifying when the shares were bought may have changed its business by the date of death. Executors should verify qualifying status with a specialist before relying on BPR on the estate return.
How did the Autumn Budget 2024 change inheritance tax on AIM shares?
The Autumn Budget 2024 (30 October 2024) introduced a combined £1 million cap on 100% business property relief (BPR) and agricultural property relief (APR) from 6 April 2026. This significantly reduces the IHT benefit of AIM shares for portfolios above that threshold. BEFORE APRIL 2026 (CURRENT RULES): qualifying AIM shares attract 100% BPR with no upper limit. An AIM portfolio worth £3 million can pass free of IHT if the shares qualify and the 2-year holding condition is met. AFTER APRIL 2026 (NEW RULES): the combined BPR and APR relief is capped at £1 million at the 100% rate. Assets above £1 million that qualify for BPR (or APR) receive only 50% relief — an effective IHT rate of 20% on the excess (50% of the standard 40% rate). Example: AIM portfolio worth £2 million, all qualifying for 100% BPR — under new rules: first £1 million = full relief (IHT £nil); remaining £1 million = 50% relief, so £500,000 taxable at 40% = IHT £200,000. This represents a significant change for investors who built large AIM portfolios specifically for IHT planning. The NRB (£325,000) and any RNRB are applied after BPR, which may reduce the IHT further. PER INDIVIDUAL CAP: the £1 million cap applies per individual. A couple each has a £1 million BPR/APR cap. Married couples or civil partners with separate AIM portfolios each have their own £1 million cap, potentially sheltering £2 million combined at 100% relief.
What is an AIM ISA and does it help with inheritance tax planning?
An AIM ISA is an Individual Savings Account that holds shares listed on AIM (rather than shares listed on the main London Stock Exchange). Many AIM-listed shares qualify for BPR, so investors have used AIM ISAs to build an IHT-efficient portfolio within a tax-sheltered ISA wrapper. BEFORE APRIL 2026: this strategy worked well for portfolios up to any size — both the ISA tax benefits (no income tax on dividends, no CGT on gains) and the BPR IHT relief applied. AFTER APRIL 2026: the AIM ISA remains effective as an ISA (income and CGT tax sheltering) and still provides IHT relief through BPR, but the £1 million BPR cap means portfolios above £1 million no longer get full IHT relief on the excess. This does not make AIM ISAs worthless for IHT planning — a £1 million AIM ISA still passes entirely free of IHT — but investors who built multi-million-pound AIM ISAs specifically to shelter a large estate from IHT will need to review their strategy. KEY RISKS WITH AIM ISA IHT PLANNING: (1) individual company risk — AIM companies are smaller and higher risk than main market companies; portfolio concentration risk is significant; (2) qualifying status risk — a company that was qualifying when shares were bought may lose qualifying status due to a change in its business model or if it is acquired; (3) the 2-year holding period must be maintained — selling and buying replacement shares may restart the clock; (4) HMRC scrutiny — AIM IHT portfolios are a known HMRC focus area; (5) from April 2026, the cap significantly reduces the benefit for larger portfolios. IS AN AIM ISA RIGHT FOR YOU? For smaller estates (under the NRB threshold), AIM ISAs offer no IHT benefit because there is no IHT to save. For mid-range estates (£325,000–£1.5 million), AIM ISAs can meaningfully reduce IHT. For larger estates, AIM ISAs are now one element of a broader plan rather than a complete solution.
How do I claim business property relief on AIM shares in an estate?
BPR on AIM shares is claimed on IHT400 Schedule IHT412 (unlisted stocks and shares and control holdings) where the company is not listed on a recognised stock exchange, or IHT411 (listed stocks and shares) for AIM shares. Wait — AIM is technically a 'recognised stock exchange' for some purposes but not for others. For BPR purposes, AIM shares are treated as unquoted shares (not listed on a recognised stock exchange for BPR purposes under IHTA 1984 s.105(1)(b)), which is why they qualify for BPR at all. They should be reported on IHT412. HOW TO CLAIM: (1) list each AIM holding with company name, number of shares, and value at date of death; (2) confirm 2-year ownership period for each holding; (3) assess qualifying status — has the company been carrying on a qualifying trade throughout the 2-year period? (4) claim BPR on the eligible shares; (5) apply the £1 million cap (from April 2026) across all BPR/APR assets; (6) if shares were in an AIM ISA, they still form part of the estate but the ISA wrapper provides income tax and CGT benefits during lifetime — the ISA does not change the IHT treatment. SPECIALIST EXECUTORS: for large AIM portfolios, executors should engage a specialist tax adviser to verify qualifying status and complete the IHT return. HMRC may raise a compliance check questioning the qualifying status of specific companies. Executors can be personally liable if BPR is incorrectly claimed.
What alternatives to AIM shares are there for inheritance tax planning?
Following the Budget 2024 changes, investors who relied on AIM shares for IHT planning should review their strategy. Key alternatives and complements include: LIFETIME GIFTS: making outright gifts to beneficiaries while alive — gifts become PETs (potentially exempt transfers) and fall outside the estate if the donor survives 7 years. No IHT on the gift; CGT may apply if assets with embedded gains are gifted, but CGT holdover relief may be available for business assets. ANNUAL EXEMPTION: £3,000 per year, £6,000 in the year following a year in which the exemption was not used. Gives certainty of IHT saving; no 7-year wait. NORMAL EXPENDITURE OUT OF INCOME: regular gifts from surplus income are immediately exempt from IHT — no 7-year rule. Powerful for individuals with regular income exceeding their expenditure (e.g., pension income exceeding living costs). WHOLE-OF-LIFE INSURANCE IN TRUST: a whole-of-life policy written in trust pays out on death free of IHT (because it is held in trust, not in the estate). The premium is paid from the estate during lifetime; if premiums come from regular income, they may qualify as normal expenditure out of income. FAMILY INVESTMENT COMPANY: a private limited company holding investments, with shares given to family members. Potentially IHT-efficient (shares can attract BPR if the company is structured correctly), income-tax efficient, and can retain control via different share classes. CHARITABLE LEGACY: a will leaving at least 10% of the net estate to charity reduces the IHT rate from 40% to 36% on the remainder. For large taxable estates, this saves more in IHT than the charitable gift costs. DISCRETIONARY TRUST: placing assets in a discretionary will trust can use the NRB on first death and freeze further growth within the trust (subject to periodic charges and exit charges).
Related guides
Make sure your will reflects your investment strategy
Your will should coordinate with your AIM share holdings and any other IHT planning. A professionally structured will ensures BPR-qualifying assets pass efficiently to beneficiaries.