Inheritance Tax on Shares UK: How Every Share Type Is Valued and Taxed (2026)
All shares are included in the IHT estate — the ISA wrapper provides no IHT exemption. Listed shares are valued at the quarter-up price; unlisted shares are negotiated with HMRC. AIM shares in qualifying trading companies qualify for 100% BPR after 2 years — effectively IHT-exempt. If shares fall in value after death, you can claim an IHT refund via loss on sale relief (s179 IHTA 1984).
| Share / Investment Type | In IHT Estate? | IHT Relief? | Valuation Method |
|---|---|---|---|
| Listed shares (LSE main market, NYSE) | Yes | None | Quarter-up rule or average bargains — whichever lower |
| AIM shares (qualifying trading company, 2yr+) | Yes — but 100% BPR | 100% BPR (up to £1m cap from Apr 2026) | AIM market price; BPR reduces IHT value to £0 |
| Unquoted/unlisted shares (trading company, 2yr+) | Yes — but 100% BPR | 100% BPR (up to £1m cap from Apr 2026) | HMRC Shares Valuation (earnings/net assets) |
| Unquoted shares (investment company) | Yes | None (fails trading test) | HMRC Shares Valuation (net assets basis) |
| Stocks & Shares ISA (non-AIM) | Yes | None | Market value at date of death |
| AIM ISA (qualifying BPR shares, 2yr+) | Yes — but 100% BPR | 100% BPR on qualifying shares | AIM market price; BPR reduces IHT value to £0 |
| VCT shares (listed company) | Yes | None (listed; no controlling interest) | Listed market price (quarter-up rule) |
| EIS shares (unquoted trading company) | Yes — may qualify for BPR | 100% BPR if trading test met and 2yr+ | HMRC Shares Valuation |
| Foreign listed shares (UK domiciled deceased) | Yes | None (DTTs provide limited IHT relief) | Market price in local currency, converted to GBP |
| Listed shares sold by estate within 12m below probate | Refund available | Loss on sale relief (s179 IHTA 1984) | Sale price substituted for probate value on IHT refund claim |
2026/27 figures. BPR cap: £1m combined BPR+APR at 100% from April 2026; 50% above cap (effective 20% IHT). Loss on sale (s179 IHTA): claim within 4yr of the end of the 12-month sale window.
Inheritance Tax on Shares: Complete Guide
Listed shares — the quarter-up valuation rule
Shares listed on a recognised stock exchange (London Stock Exchange main market, NYSE, NASDAQ, etc.) are valued for IHT purposes using the 'quarter-up' rule. The quarter-up price is the lower of two values: (a) The lower closing price on the date of death + one-quarter of the difference between the lower and higher closing price on that day (the 'quarter-up' from the lower price); (b) The average of the highest and lowest marked bargains (recorded transactions) on the date of death. The lower of these two figures is the IHT value. If the market is closed on the date of death (bank holiday, weekend): use the prices from the preceding business day OR the following business day — whichever gives the lower value (the 'nearest business day' rule). If shares are suspended from trading: use the last traded price, adjusted if the suspension was material. Joint shareholdings: where shares are held in joint names, only the deceased's share is included in their estate.
Unlisted (unquoted) shares — HMRC Shares Valuation
Unlisted shares (in private companies whose shares are not traded on any recognised stock exchange) are valued by HMRC's Shares Valuation team. The valuation approach depends on the nature of the company: (1) Net assets basis: used for holding companies, investment companies, and property companies — the value of the net assets (assets minus liabilities) is apportioned to the shareholding. A minority discount may apply (the shares are worth less than a pro-rata share of the net assets because the minority shareholder has no control); (2) Earnings basis: used for profitable trading companies — a maintainable earnings figure is multiplied by an appropriate P/E ratio to arrive at a market value, then apportioned to the shareholding; (3) Dividend yield basis: used where shares pay regular dividends (particularly minority holdings in established businesses); (4) Combination: in practice, HMRC often uses a combination of approaches and negotiates with the estate's advisers. Key planning point: unlisted shares in qualifying trading companies may qualify for 100% BPR (ss103-114 IHTA 1984) after 2 years' ownership, effectively reducing their IHT value to nil (up to the £1m combined BPR/APR cap from April 2026).
AIM shares — BPR and the IHT exemption
AIM (Alternative Investment Market) shares in qualifying trading companies are one of the most effective IHT planning tools available. AIM is not a 'recognised stock exchange' for tax purposes — AIM shares are treated as 'unquoted' for BPR purposes. This means: 100% BPR (s105(1)(bb) IHTA 1984) is available on qualifying AIM shares after 2 years' continuous ownership. The IHT value of qualifying AIM shares after 2 years is reduced to £0 by BPR — effectively making them IHT-exempt. Key requirements: (1) 2 years' continuous ownership of the specific holding (recent purchases within the last 2 years may not qualify); (2) The company must pass the BPR trading test (s105(3) IHTA 1984) — it must NOT be wholly or mainly making or holding investments. Pure investment companies fail this test; (3) From April 2026: combined BPR/APR cap of £1,000,000 per estate at 100% — above the cap, only 50% BPR applies (effective 20% IHT rate). AIM ISA: AIM BPR-qualifying shares held within an ISA wrapper retain their BPR eligibility — the best of both worlds: ISA income tax efficiency during life + IHT exemption on death (for qualifying shares after 2 years). A specialist AIM BPR portfolio manager selects qualifying shares and monitors trading test compliance.
Stocks and Shares ISAs — no IHT exemption
A Stocks and Shares ISA is in the IHT estate at the full market value of the investments held within it at the date of death. The ISA tax wrapper provides income tax and CGT efficiency during life — but there is no IHT exemption for standard ISA investments. Standard funds, ETFs, UK equity funds, and non-AIM listed shares held inside an ISA are fully subject to IHT at 40% on the amount above the threshold. Exception: AIM BPR-qualifying shares held inside the ISA wrapper. Where AIM shares within a Stocks and Shares ISA qualify for BPR (trading company, 2+ years' ownership), they may be 100% IHT-exempt (up to the £1m combined BPR/APR cap). The AIM ISA is a niche product offered by specialist ISA managers who select and monitor AIM BPR-qualifying companies within the ISA. Note: the AIM market is higher risk than mainstream equities — the BPR benefit must be weighed against the investment risk. The shares must qualify for BPR at the date of death — if the company's trading status changes (becomes investment-heavy), the BPR may be lost.
Loss on sale of shares — claiming an IHT refund
If listed shares included in the IHT estate are sold within 12 months of the date of death at a price below the probate (IHT) value, the personal representatives can claim to substitute the sale price for the probate value (s179 IHTA 1984 — the 'loss on sale of qualifying investments' relief). This effectively means: the estate claims a refund of the IHT paid on the difference between the probate value and the lower sale price. The 12-month window runs from the date of death. Conditions: (a) The shares must be listed on a recognised stock exchange; (b) The sale must be made by the personal representatives (not the beneficiaries — shares distributed to beneficiaries first, then sold, do not qualify); (c) The claim must be made within 4 years of the end of the 12-month qualifying period. Important: if the estate also sells shares that have increased in value above the probate value within the same 12-month period, the gains offset the losses — the claim is on the net position across all qualifying investment sales in the 12-month window. This relief can save significant IHT where share prices have fallen between the date of death and when the estate is administered.
EIS, VCT, and other specialist shares
Specialist share types and their IHT treatment: (1) Enterprise Investment Scheme (EIS) shares: in the estate at market value. EIS shares in qualifying trading companies may qualify for BPR at 100% after 2 years' ownership — but this is separate from the EIS income tax relief (30% income tax relief) and CGT deferral. EIS shares are unlisted and must pass the BPR trading test. Many EIS companies will qualify; (2) Venture Capital Trust (VCT) shares: VCTs are listed on the London Stock Exchange (main market) — they are listed shares for IHT purposes. BPR does not apply to listed company shares (only controlling interests in listed companies). VCT shares are in the estate at market value and subject to IHT at 40% above the threshold — no IHT relief; (3) Preference shares and loan stock: in the estate at face value (plus accrued interest). Preference shares in quoted companies are valued as listed shares; preference shares in unquoted companies are valued as unlisted shares; (4) Foreign shares: where the deceased was UK domiciled (or deemed UK domiciled), foreign shares (including US, European, and other international equities) are in the IHT estate at their market value. Double Tax Treaties may provide some relief where the foreign country also taxes the asset on death, but the UK's IHT treaties are limited.
Frequently Asked Questions
Are shares included in inheritance tax?
Yes — all shares are included in the IHT estate at their open market value at the date of death. Listed shares: valued at the lower of the quarter-up price or average bargains on the date of death. Unlisted shares: negotiated with HMRC Shares Valuation (net assets, earnings multiple, or dividend yield basis). Exception: AIM shares in qualifying trading companies are 100% IHT-exempt via Business Property Relief (BPR — s105(1)(bb) IHTA 1984) after 2 years' ownership (up to £1m combined BPR/APR cap from April 2026).
Are shares in an ISA exempt from inheritance tax?
No — shares in an ISA (Stocks and Shares ISA or Cash ISA) are in the IHT estate at full market value. The ISA tax wrapper provides income tax and CGT benefits during life but no IHT exemption. Exception: AIM BPR-qualifying shares held inside a Stocks and Shares ISA may qualify for 100% BPR after 2 years' ownership — these specific shares may be IHT-exempt, even within the ISA. Standard funds, ETFs, and non-AIM listed shares within an ISA are fully subject to IHT.
How are shares valued for inheritance tax?
Listed shares (main market, NYSE, etc.): the 'quarter-up' rule — the lower of (a) lower closing price + 25% of the difference between lower and higher closing price, or (b) average of highest and lowest marked bargains on the date of death. Unlisted shares: HMRC Shares Valuation team negotiates the value with the estate — net assets basis (for investment/holding companies), earnings multiple (for profitable trading companies), or dividend yield. AIM shares: treated as unlisted; valued at market price on AIM; then BPR may reduce the IHT value to £0 if qualifying.
Do AIM shares avoid inheritance tax?
Qualifying AIM shares can achieve 100% IHT exemption via Business Property Relief (BPR — s105(1)(bb) IHTA 1984) after 2 years' continuous ownership. The company must pass the BPR trading test (not wholly/mainly investment). From April 2026: 100% BPR is capped at £1m combined BPR/APR per estate; above the cap, 50% BPR applies (effective 20% IHT rate). Not all AIM shares qualify — only shares in qualifying trading companies. A specialist AIM BPR portfolio manager selects qualifying companies and monitors compliance.
Can I claim an IHT refund if shares fall in value after death?
Yes — if listed shares in the estate are sold by the personal representatives within 12 months of death at below the probate value, the estate can claim loss on sale relief (s179 IHTA 1984) — substituting the sale price for the probate value and claiming a refund of the IHT on the shortfall. The 12-month window runs from the date of death. The claim must be made within 4 years of the end of the 12-month period. Offsetting gains: if the estate also sells listed shares at a profit within the same 12-month window, the net gain offsets the net loss before the refund is calculated.
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