BPR on AIM Shares from April 2026: Worked Example of the New 50% Relief and 20% IHT Charge

From 6 April 2026, qualifying AIM shares get only 50% business property relief instead of the old 100%. Because the relieved-but-taxable half is charged at the 40% inheritance tax rate, that produces an effective 20% IHT charge on AIM holdings. On a £500,000 AIM portfolio that is roughly £100,000 of IHT — and, unlike most other business assets, AIM shares do not share in the new £1 million 100%-relief allowance.

What changed on 6 April 2026

Business property relief (BPR, also called Business Relief) used to wipe out 100% of the inheritance tax (IHT) value of qualifying shares held on the Alternative Investment Market (AIM). At Autumn Budget 2024 the government announced that from 6 April 2026 the relief on these shares is cut to 50%.

HMRC's guidance is explicit: from that date, 50% relief applies to "shares admitted to trading on a recognised stock exchange which are not 'listed'" — which is exactly how AIM shares are categorised for IHT — and these shares "do not receive the £1 million allowance" that other 100%-relief assets now share (GOV.UK: APR and BPR reforms).

Why 50% relief means an effective 20% charge

It is easy to misread "50% relief" as a 50% tax. It isn't. Relief removes half the value from the IHT calculation; the remaining half is then taxed at the normal 40% IHT rate. So the effective rate on the whole holding is roughly 50% × 40% = 20%, before any nil-rate bands are applied.

Rates per GOV.UK: What qualifies for Business Relief. The standard IHT death rate of 40% is set out at GOV.UK: Inheritance Tax.

Worked example: a £500,000 AIM portfolio

Two cautions on this example. First, AIM share prices are volatile — the value used is the value at the date of death, so the "£500,000" can move sharply between a will being written and an estate being valued. Second, this calculation sits on top of the rest of the estate; whether any nil-rate band (currently £325,000) is left to set against it depends entirely on the other assets. The 20% effective figure is the relief-and-rate mechanics, not a promise of the final bill.

The two-year holding period — and which AIM companies don't qualify

BPR is never automatic. Two tests have to be met before any AIM holding gets even the reduced 50% relief.

1. Owned for at least two years

The deceased must have owned the shares "for at least 2 years before they died" (GOV.UK). Shares bought weeks before death get nothing. There are limited replacement-property and inheritance-from-a-spouse rules that can preserve the clock, but the default is a clean two-year qualifying period.

2. The company must be a trading business, not an investment one

BPR is relief for businesses, not for investments dressed up as shares. Relief is denied where a company "mainly deals with securities, stocks or shares, land or buildings, or in making or holding investments." In practice the AIM companies that fall outside BPR are typically:

• Property investment and property-letting companies (income from holding land/buildings, not trading);
• Investment companies, holding companies whose main activity is holding investments, and many investment trusts;
• Companies that mainly deal in securities, stocks or shares;
• Some financial and money-lending operations that are investment rather than trading in nature.

HMRC looks at the business "in the round" — a company that is more than 50% investment by activity will usually lose relief entirely. So even after April 2026, the answer for a given AIM share can still be 100% taxed (no BPR), 50% relieved (qualifying AIM), and the right answer depends on the underlying company, not the fact it trades on AIM.

Why AIM shares are shut out of the new £1m allowance

The headline of the 2026 reforms is a new £1 million allowance for the combined value of assets that qualify for 100% BPR or 100% agricultural property relief; value above £1m gets 50% relief (GOV.UK reforms guidance).

AIM shares are deliberately carved out of that allowance. The reform document states the 50% rate applies to "shares admitted to trading on a recognised stock exchange which are not 'listed'" and that these "do not receive the £1 million allowance." The logic is structural: the £1m allowance restores 100% relief to genuine family/private trading businesses, while AIM holdings (which were a popular IHT-planning product) move permanently to a flat 50% — there is no first slice that escapes tax. For an estate, that means an AIM portfolio is charged at the effective 20% rate from the first pound of relievable value, with no £1m cushion.

How to report it: IHT400, schedule IHT412, and the 10-year instalment option

AIM shares are reported on the main IHT account, form IHT400, supported by the unlisted-shares schedule.

Because AIM shares are treated as unlisted for IHT, they belong on IHT412, not the listed-shares schedule (IHT411). Form IHT412 is, in HMRC's own words, for shares "listed on the Alternative Investment Market (AIM)" among other unlisted holdings (GOV.UK: IHT412).

Paying over 10 interest-free instalments

Shares and business assets that "may take time to sell" can have their IHT paid "in equal annual instalments over 10 years," and unlisted shares (which is how AIM shares are treated) can fall within this option (GOV.UK: paying in instalments).

The genuinely new point from the same reform package: for assets inherited on or after 6 April 2026 that qualify for Business Relief (or Agricultural Relief), the instalments are interest-free across the full 10 years, rather than carrying interest on the outstanding balance as most instalment options do. So an executor of a qualifying AIM portfolio can spread the (now effective-20%) charge over a decade without an interest cost — useful when the shares themselves are hard to sell quickly without depressing the price.

Frequently asked questions