Business Property Relief on AIM Shares After April 2026: 100% Relief Cut to 50%

From 6 April 2026, shares quoted on AIM (and other "not listed" markets) drop from 100% Business Property Relief to a flat 50%, and they sit outside the new £2.5 million 100% relief allowance. In practice that turns a tax-free AIM portfolio into a partly taxable one: a £400,000 holding that paid no inheritance tax before can now generate an £80,000 IHT charge.

For two decades, holding AIM shares for at least two years was one of the cleanest ways to take money out of a higher-rate estate. The shares qualified for 100% Business Property Relief (BPR), so on death their full value fell out of the inheritance tax (IHT) net. That era ends on 6 April 2026. This guide explains exactly what changes, walks through the new maths with a named worked example, and shows how the cut reshapes IHT planning for estates above the nil-rate bands.

What actually changes on 6 April 2026

The reform announced at the October 2024 Budget made two separate changes to Business Property Relief. The figures below were updated by the government on 23 December 2025, raising the 100% allowance from the originally proposed £1 million to £2.5 million.

1. A capped 100% allowance for mainstream business and agricultural property. From 6 April 2026, the 100% rate of relief is limited to the first £2.5 million of combined qualifying agricultural and business property per estate. Anything above that gets 50% relief. The government confirms: "Increase the threshold at which 100% Agricultural Property Relief and Business Property Relief applies from £1 million to £2.5 million per estate" (GOV.UK news release, 23 December 2025).

2. A separate, harsher rule for AIM and other "not listed" shares. Shares designated as "not listed" on the markets of recognised stock exchanges — AIM is the obvious example — are reduced from 100% to 50% relief in all circumstances, and they do not benefit from the £2.5 million allowance at all. HMRC's own guidance on what qualifies now places "shares on non-listed markets (for example, the Alternative Investment Market)" squarely in the 50% relief category (GOV.UK: What qualifies for Business Relief).

Rates per GOV.UK Business Relief guidance and the HMRC summary of reforms, as amended 23 December 2025.

The worked example: a £400,000 AIM portfolio now creating an £80,000 IHT charge

The cleanest way to see the impact is to run the same portfolio before and after 6 April 2026.

The £80,000 figure is the cost of the relief moving from 100% to 50% on a higher-rate estate. The arithmetic is simply: portfolio value × 50% lost relief × 40% IHT rate. On a £400,000 portfolio that is £400,000 × 0.50 × 0.40 = £80,000. The same formula scales linearly — see the table below.

Assumes the estate is already above all available nil-rate bands, so the AIM value is taxed at the full 40% rate. Estates partly sheltered by unused nil-rate band would pay less.

Why AIM shares sit outside the new £2.5m allowance

This is the part that trips people up. The headline of the reform — "£2.5 million of 100% relief, then 50%" — sounds like it should protect a £400,000 AIM portfolio comfortably. It does not, because the legislation treats AIM shares as a separate category.

The Finance Bill 2025-26 inserts a new structure into the Inheritance Tax Act 1984 that gives each estate a £2.5 million "100% allowance" for qualifying agricultural and business property. But the rule for shares "not listed" on a recognised stock exchange is written so that the relief rate is 50% and, in HMRC's words, "the rate of relief will not be affected by the new allowance" (HMRC summary of reforms).

In plain terms: the £2.5 million allowance is a pot that mainstream business and farm assets draw down. AIM shares are not allowed to draw from that pot at all. They are handed a flat 50% relief whether they are worth £40,000 or £4 million. When the allowance rose from £1m to £2.5m in December 2025, the government specifically confirmed that "the treatment of AIM shares was unaffected" by that increase.

The 2-year ownership rule still applies to qualify for any relief

One thing the reform does not change is the minimum holding period. To get any Business Property Relief on AIM shares — even the reduced 50% — the deceased must have owned them for long enough. GOV.UK is explicit: "You can only get relief if the deceased owned the business or asset for at least 2 years before they died" (GOV.UK: What qualifies for Business Relief).

So the picture from 6 April 2026 is:

• Held for under 2 years: no relief at all — the full value is in the estate at 40%.
• Held for 2 years or more: 50% relief — half the value is in the estate at 40%.
• Held for 2 years or more, under the old rules (death before 6 April 2026): 100% relief — out of the estate entirely.

The two-year clock is unforgiving and is one of the practical risks of AIM BPR portfolios: if a holder dies, say, 18 months after buying in, even the reduced 50% relief is unavailable. There are limited "replacement property" rules that can preserve the clock when one qualifying holding is sold and another bought, but the underlying two-year requirement is unchanged by the 2026 reform.

How this reshapes IHT planning for higher-rate estates

For estates already over the nil-rate bands, AIM BPR was always a trade-off: accept the volatility and higher cost of small-company shares in exchange for the inheritance tax saving. Halving the relief halves the size of that prize while leaving the risk untouched. That changes the calculation, not necessarily the conclusion.

1. The effective IHT rate on AIM shares roughly doubles

Under the old rules a qualifying AIM portfolio faced an effective IHT rate of 0%. From 6 April 2026 it faces 20% (half of the value taxed at 40%). That is still better than the 40% an ordinary investment portfolio would suffer — but the gap between "AIM for BPR" and "a normal diversified portfolio" has narrowed from 40 points to 20.

2. Compare AIM against the alternatives, not against zero

Because the saving is smaller, AIM BPR now competes more directly with other planning tools: outright gifts that become exempt after seven years, gifts into trust, whole-of-life cover written in trust to fund the bill, and (for those who qualify) genuine trading-company investments that still attract the full 100% allowance. None of these is right for everyone; the point is that AIM is no longer the obvious default it was.

3. The two-year clock matters more, not less

With only 50% relief at stake, some investors will be tempted to wait or to switch strategies. But starting late still means starting the two-year clock late. For an older or unwell client, the realistic choice may be "50% relief in two years" versus "nothing at all if death comes first" — which still favours holding qualifying shares early, just with clear eyes about the reduced benefit.

4. Watch the interaction with the rest of the estate

Because AIM shares no longer touch the £2.5 million allowance, that whole allowance is available for genuine business and agricultural property. For families with both a trading company and an AIM portfolio, the planning is now two separate conversations: maximise the £2.5m 100% allowance on the company; treat the AIM portfolio as a 50%-relief, no-allowance asset on top.

Sources

• GOV.UK — Business Relief for Inheritance Tax: what qualifies (50% / 100% rates, 2-year ownership rule, AIM treated as a non-listed market)
• GOV.UK — Summary of reforms to APR and BPR (100%→50% for non-listed shares; rate not affected by the allowance)
• GOV.UK — Inheritance tax reliefs threshold to rise to £2.5m (allowance raised £1m→£2.5m on 23 December 2025; AIM treatment unaffected)

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