Inheritance Tax on Shares UK (2026): ISAs, AIM, Listed Shares, and How to Value a Portfolio for Probate

Yes, all shares owned by the deceased at the date of death are included in the estate for inheritance tax purposes, subject to specific exemptions and reliefs. There is no general exemption for shareholdings: (1) LISTED/QUOTED SHARES (UK and overseas): shares listed on the London Stock Exchange (Main Market) or other recognised stock exchanges are included at the date-of-death value. The standard valuation method for probate is the 'quarter-up rule': take the lower of the two prices shown in the Stock Exchange Daily Official List (SEDOL) for the date of death; add one quarter of the difference between the higher and lower prices. Example: shares quoted at 400p/402p. Quarter-up value = 400 + ¼ × (402-400) = 400.5p. Alternatively, HMRC accepts the average of the two prices. Use the lower of the quarter-up calculation and the mid-price method; (2) ISA-HELD SHARES, NO IHT PROTECTION: this is the single most commonly misunderstood point in estate planning. An ISA wrapper (Individual Savings Account) provides no inheritance tax protection. Shares (or cash) held inside a stocks and shares ISA are included in the estate at their full market value on the date of death, exactly as if held outside the ISA. The only IHT protection an ISA provides is the absence of income tax and CGT on investment returns during the lifetime of the investor, IHT is not part of the ISA wrapper's benefits. ISA APS (Additional Permitted Subscription): the surviving spouse or civil partner can inherit the deceased's ISA allowance (an additional subscription equal to the deceased's ISA value), this extends the survivor's own ISA tax protection going forward, but it does not create any retroactive IHT exemption; (3) AIM-LISTED SHARES, BUSINESS PROPERTY RELIEF AT 50% (FROM APRIL 2026): shares listed on AIM (Alternative Investment Market) that are in qualifying trading companies can attract Business Property Relief (BPR) under IHTA 1984 s.105. From 6 April 2026 (following the 2024 Autumn Budget), BPR on AIM shares was reduced from 100% to 50%, meaning 50% of the qualifying AIM share value is exempt from IHT. Conditions: (a) the AIM company must carry on a qualifying trade (investment companies, property companies, and certain financial companies do not qualify, IHTA 1984 s.105(3)); (b) shares held for at least 2 years before death (IHTA 1984 s.106); (c) the deceased must have held the shares as an investor in a trading business, not simply as a portfolio investment. HMRC can investigate and refuse BPR; (4) UNLISTED PRIVATE COMPANY SHARES, 100% BPR: shares in an unquoted (non-listed, non-AIM) private limited company trading business still attract 100% BPR under IHTA 1984 s.105(1)(bb), provided the company qualifies as a trading business and shares have been held 2+ years; (5) INVESTMENT TRUSTS, HOLDING COMPANIES, PROPERTY COMPANIES: BPR is NOT available for shares whose main underlying activity is investment, property holding, or financial dealing. IHTA 1984 s.105(3) excludes 'businesses consisting mainly of making or holding investments'. Most investment trusts do not qualify for BPR.

Unit trusts, Open-Ended Investment Companies (OEICs), and other collective investment schemes are valued for IHT purposes at the bid price (the lower of the buying/selling spread) on the date of death: (1) UNIT TRUSTS: units are valued at the bid (sell) price on the date of death. The spread between the offer (buy) price and bid (sell) price can be significant, always use the bid price for probate. If the date of death is a weekend, bank holiday, or non-trading day, use the last available bid price before death; (2) OEICs (OPEN-ENDED INVESTMENT COMPANIES): OEICs operate on a single price (unlike dual-priced unit trusts). Use the single price on the date of death; (3) WHERE TO FIND PRICES: contact the fund manager directly for historic bid prices on the date of death. The Investment Association publishes price data. The fund manager should provide a valuation letter for probate purposes; (4) INVESTMENT PLATFORMS (HARGREAVES LANSDOWN, AJ BELL, VANGUARD, ETC.): the platform holds the investments in nominee form on behalf of the investor. The beneficial ownership is with the deceased. Contact the platform's bereavement service, they will provide a formal valuation on the date of death and can send assets directly to the estate once probate is granted; (5) NO BPR FOR UNIT TRUSTS OR OEICS: collective investments do not qualify for Business Property Relief regardless of the underlying assets. If the underlying holdings include AIM shares that would individually qualify for BPR, the wrapper (unit trust/OEIC) breaks the link, the investor holds units/shares in the fund, not the underlying AIM shares directly. Some IHT specialists structure direct AIM holdings (outside a fund wrapper) specifically to preserve BPR; (6) ISA-HELD UNIT TRUSTS AND OEICS: as with ISA-held shares, there is no IHT exemption for collective investments held inside an ISA. The full bid price value on the date of death is included in the estate; (7) INTERNATIONAL FUNDS: funds domiciled in Ireland, Luxembourg, or other jurisdictions but held by a UK-domiciled investor are fully included in the UK IHT estate. Double taxation treaties may apply to reduce overseas taxes but do not remove UK IHT liability.

The Autumn Budget 2024 announced a significant change to Business Property Relief for AIM-listed shares. From 6 April 2026, BPR on AIM shares is reduced from 100% to 50%: (1) WHAT CHANGED: before April 2026, shares in qualifying AIM-listed trading companies attracted 100% BPR, they were completely exempt from IHT after being held for 2 years. This made AIM share portfolios a popular (if risky) IHT planning strategy. From April 2026, only 50% of the qualifying AIM share value is exempt, meaning 50% of the value is now chargeable to IHT at 40%; (2) IMPACT ON EXISTING AIM IHT PORTFOLIOS: holders of AIM portfolios assembled specifically for IHT planning (typically £200,000-£2,000,000+ in AIM shares) will see their effective IHT on those holdings increase significantly. A £500,000 AIM portfolio: pre-April 2026: £0 IHT (100% BPR). Post-April 2026: £500,000 × 50% × 40% = £100,000 IHT on the AIM portfolio. Many IHT-planning AIM portfolios were sold by wealth managers and platforms specifically as IHT planning vehicles, holders should urgently take advice on the impact of this change; (3) THERE IS STILL A CAP ON COMBINED BPR AND APR RELIEFS: the 2024 Budget introduced a combined £1 million cap on 100% BPR/APR relief per individual (£2 million for a couple using transferable nil-rate band). Above £1 million of qualifying assets, the rate of relief falls to 50%. This cap applies across both BPR (shares) and APR (farmland). Qualifying business assets above £1 million: 50% relief, not 100%. This is a separate issue from the AIM-specific 50% cap; (4) HMRC CONDITIONS FOR AIM BPR STILL APPLY: qualifying conditions have not changed, the company must be carrying on a qualifying trade; shares must have been held for 2+ years; the business must not be mainly investment/property; HMRC can investigate after death; (5) PLANNING ALTERNATIVES FOR AIM PORTFOLIOS: following the April 2026 change, AIM portfolios are less attractive for pure IHT planning. Alternatives include: accelerating gifts (7-year clock runs); trusts; family investment companies; pension contributions (until April 2027 pension IHT change); gifts to charity.

Shares must be reported on the inheritance tax return and included in the probate valuation. The exact process depends on whether the estate requires a full IHT return or the simplified excepted estates process: (1) OBTAIN THE DATE-OF-DEATH VALUATION: contact each broker, platform, registrar, and investment manager. For listed shares: use the quarter-up rule or average mid-price from the SEDOL on the date of death. For unit trusts/OEICs: use the bid price from the fund manager. For AIM shares: obtain a price from the market maker or platform on the date of death, then apply the relevant BPR reduction (50% for AIM qualifying shares). For unlisted private company shares: professional valuation required (RICS or specialist share valuer); (2) FULL IHT RETURN (IHT400): required if the estate exceeds the nil-rate band, or if it is not an excepted estate. List all shares on IHT412 (quoted shares) and IHT413 (unquoted shares). BPR is claimed on IHT412/IHT413 as appropriate. AIM shares go on IHT412 (quoted). Supporting valuations should be retained and provided to HMRC on request; (3) HMRC IHT STOCK AND SHARES HELPLINE: HMRC has a specific helpline for share valuation queries (Shares and Assets Valuation team). Provide the share name, ISIN/SEDOL, date of death, and number of shares held, HMRC will confirm or negotiate the date-of-death valuation; (4) EXCEPTED ESTATES (SIMPLER PROCESS): if the estate qualifies as an 'excepted estate' under the Inheritance Tax (Delivery of Accounts) (Excepted Estates) Regulations 2004 (as amended 2022), a full IHT400 may not be required. You instead complete a simpler IHT205 (or IHT207 for domicile elsewhere) and the online probate application includes the IHT summary. Qualifying conditions for excepted estate status include: estate value below threshold; spouse/civil partner exemption applies; etc.; (5) SELLING SHARES DURING ADMINISTRATION: personal representatives may sell shares during administration. CGT applies on any gain above the probate value (at 20% for non-residential assets for PRs). If shares fall in value below the probate value and are sold at a loss, it is possible to claim loss relief, IHT overpayment refund is available if qualifying investments are sold within 12 months of death at a lower price (IHT35 claim).

Several strategies can reduce the IHT on share portfolios passed through an estate: (1) HOLDING AIM SHARES FOR BPR (WITH REDUCED RELIEF): despite the reduction to 50% from April 2026, AIM BPR still provides meaningful relief for larger share portfolios. For a £1 million qualifying AIM portfolio: 50% exempt = £500,000 exempt; IHT on the chargeable 50% = £200,000 (if the nil-rate band is already fully used). Without any BPR, IHT would be £400,000. The saving is still £200,000, significant, though half what it was pre-April 2026. Note: AIM shares carry genuine investment risk and volatility; (2) HOLDING UNLISTED PRIVATE COMPANY SHARES: 100% BPR remains available for qualifying unlisted trading company shares (above the £1 million combined BPR/APR cap: 50%). This is very relevant for business owners, a trading company's shares may pass entirely IHT-free. Take specialist advice on whether the company qualifies (no investment/property activity); (3) DEED OF VARIATION DIRECTING TO CHARITY: shares can be redirected to a charity by deed of variation within 2 years of death, the gift is treated as if made by the deceased, attracting 100% charitable exemption from IHT. For a low-basis share portfolio with a large gain: (a) IHT is eliminated on that portion; (b) no CGT arises (charities are exempt from CGT); (c) income tax relief for the charity; (4) CGT UPLIFT ON DEATH, SELL QUICKLY: as discussed in our guide to CGT uplift on death (TCGA 1992 s.62), beneficiaries inherit shares at probate value. If sold quickly after inheriting, CGT gain above probate value is zero (or small). Consider whether the beneficiary should sell and reinvest in more suitable assets rather than holding inherited shares long-term; (5) WILL TRUSTS FOR SHARES: placing shares in a discretionary will trust or interest in possession trust can: defer the IHT point to later if the trust attracts periodic and exit charges rather than immediate IHT; allow flexibility about which beneficiaries receive what; (6) LIFETIME GIFTING: shares given away during lifetime are a 'Potentially Exempt Transfer' (PET), exempt from IHT if the donor survives 7 years (IHTA 1984 s.3A). A gift of shares is also a CGT event (TCGA 1992 s.17), CGT on the gain to date of gift. For heavily appreciated shares, lifetime gifting may trigger significant CGT that outweighs the IHT saving. Model both taxes before gifting; (7) ISA TO AIM, CONSIDER RESTRUCTURING: some platforms offer AIM ISAs investing in AIM BPR-qualifying shares, providing both ISA income/CGT benefits during life and (reduced) IHT relief on death. Post-April 2026, the economics must be carefully evaluated.