AIM Shares and IHT Relief: What the 2025 Budget Changes Mean

What happens to AIM shares and IHT relief from April 2026?

1AIM shares that qualified for 100% Business Property Relief lose that full relief from 6 April 2026 — they will only attract 50% BPR.
2AIM shares held for more than two years before death will still receive 50% BPR, halving the taxable value — not zero IHT as before.
3The change applies to AIM shares included in the new £2.5m combined BPR/APR cap — so large AIM portfolios face a double hit from both the reduction in rate and the cap.
4Existing AIM IHT portfolios built under the old 100% BPR regime need to be reviewed against the new economics of 50% relief.
5Investors who built AIM portfolios primarily for IHT mitigation may wish to review whether other strategies now offer better value.

From 6 April 2026, qualifying AIM shares drop from 100% BPR to 50% BPR. Combined with the new £2.5m cap, this fundamentally changes the economics of AIM IHT portfolios. A £1m AIM holding worth nothing in IHT terms before April 2026 will now generate up to £200,000 of IHT.

This guide focuses on AIM shares specifically. For the wider BPR changes, see our guide to Business Property Relief changes from April 2026. For a broader overview of the Autumn 2024 Budget's IHT impact, see Autumn Budget 2025: Inheritance Tax Changes.

How AIM Shares and BPR Worked Before April 2026

AIM (Alternative Investment Market) shares in qualifying companies have been eligible for Business Property Relief since 1996. Provided the shares were held for at least two years before death, and the company was a qualifying trading business (not mainly investing in land, securities, or similar), the entire value of the holding attracted 100% BPR — meaning zero IHT on those shares.

This created a thriving market in "AIM IHT portfolios" — investment managers built specialist portfolios of qualifying AIM shares marketed specifically as an IHT mitigation tool. Investors could hold a diverse portfolio of growth-oriented small company shares with the expectation that after two years, the holding would sit entirely outside their taxable estate.

The appeal was that unlike lifetime gifts — which trigger the 7-year rule — AIM shares remained in the investor's name, could be sold at any time, and generated no IHT as long as the two-year holding period was met. The investor retained control.

The New Rules From April 2026

From 6 April 2026, AIM shares that previously attracted 100% BPR will only attract 50% BPR. This means:

50% of the value of qualifying AIM shares is included in the taxable estate
The included 50% is taxed at the normal 40% IHT rate (unless the estate otherwise qualifies for reliefs or exemptions)
The effective IHT rate on qualifying AIM holdings is now 20% (50% of 40%), not 0%

Additionally, the £2.5m combined cap on BPR and APR means that AIM shares compete with other BPR and APR qualifying assets for the 100% band — though given AIM shares now only attract 50% even within the cap, this is less relevant for pure AIM portfolios.

Worked Example: AIM Portfolio Impact

Example: Investor with £800,000 AIM IHT portfolio

AIM portfolio value: £800,000 (all qualifying, held 3+ years)
Other estate: £500,000
NRB: £325,000

Under old rules:

AIM: 100% BPR = fully exempt. Taxable: £500k − £325k NRB = £175k at 40% = £70,000 IHT.

Under new rules from April 2026:

AIM: 50% BPR = £400,000 included. Taxable: £400k + £500k = £900k − £325k NRB = £575k at 40% = £230,000 IHT.

Additional IHT vs old rules: £160,000.

Which AIM Shares Still Qualify for 50% BPR?

Not all AIM shares qualify for BPR — the company must be a trading business, not mainly an investment company. The qualifying conditions have not changed, only the rate of relief. Key conditions remain:

The company must carry on a qualifying trade (manufacturing, services, technology, etc.)
The company must not mainly deal in investments, land, shares, or financial instruments
The shares must have been held for at least two years before death
AIM-listed and AQSE (formerly NEX) shares qualify; shares on the main London Stock Exchange do not

It is worth noting that HMRC's view of whether a particular company qualifies is not always predictable. Specialist AIM portfolio managers employ analysts to assess qualifying status, but HMRC can and does challenge individual holdings on the basis that the company's activity is mainly investment rather than trading.

Not sure of your inheritance tax position?

IHT errors are the most common reason applications are rejected. In 2 minutes, we'll calculate your position and tell you which forms to file.

Calculate my IHT position

Should You Keep Your AIM IHT Portfolio?

The answer depends on your individual circumstances, but the key questions to ask are:

1. Is the Investment Return Still Worth It?

AIM shares are high-risk, small-company investments. Before April 2026, investors accepted lower expected returns (and higher volatility) partly because the IHT benefit offset the risk premium. With that benefit halved, the investment case needs to be reassessed on its own merits.

2. What Are the Alternatives?

Other IHT mitigation strategies remain available:

Gifting: Regular gifts using the annual £3,000 exemption, gifts out of surplus income, and larger lifetime gifts starting the 7-year clock— see our full gifting strategy guide
Life insurance in trust: A whole-of-life policy written in trust can provide a lump sum to pay IHT without reducing the estate — see our guide to life insurance in trust
Charitable legacy: Leaving 10% or more of the net estate to charity reduces IHT to 36% — see our guide to the charitable legacy IHT reduction
Normal expenditure out of income: Ongoing surplus income given away regularly is exempt from IHT with no limit — see normal expenditure out of income

3. What Is Your Total IHT Exposure?

If the rest of your estate is within the nil-rate band and RNRB, the 50% BPR on AIM shares may still reduce the overall IHT bill meaningfully. The arithmetic changes for each individual depending on the size and composition of the estate.

Tax Planning Considerations for Existing AIM Holders

If you already hold AIM shares in an IHT portfolio, consider:

Review the portfolio composition — are all holdings still qualifying? Some may have drifted out of BPR qualifying status
Reassess the overall IHT planning strategy in the light of the reduced relief rate — see the IHT planning checklist
Consider whether the CGT position on existing holdings affects the decision to hold or sell — gains crystallised on disposal would be taxable
Review whether the amount invested in AIM is still appropriate given the changed IHT mathematics and the risk profile of AIM investments
If retaining the AIM portfolio, consider supplementing it with gifting strategies to reduce the overall taxable estate

The IHT Thresholds Context

It is worth noting that the changes to AIM BPR come alongside the IHT thresholds being frozen until 2030. With house prices continuing to rise, more estates will be dragged into the IHT net even without considering AIM portfolios. The combined effect is a meaningful increase in the IHT burden for many families.

Related Guides