AIM Shares and changes to IHT relief

During the 2024 Autumn Budget, Chancellor Rachel Reeves announced changes to AIM shares and IHT relief. These will take effect from April 2026, so now may be a good time to revisit your Inheritance Tax planning.

What are AIM shares?

AIM, or the Alternative Investment Market, is a sub-segment of the London Stock Exchange (LSE). It exists to help smaller, riskier or high-growth companies attract capital from the public market.

The idea is to give these types of business a helping hand. While it’s possible for listed companies to raise capital, they don’t have to comply with such stringent regulatory requirements as companies in the main LSE market.

Buying AIM shares in these companies is, therefore, seen as riskier. However some people are attracted by the possibility of major returns on their investment.

Currently, there is another attractive reason for buying AIM shares. If you invest in them, they attract a 100% relief for Inheritance Tax (as long as you have owned the shares for at least two years). As a result, many people have invested in AIM shares with the principal motive of legitimately reducing their IHT bill. The 100% exemption is particularly attractive to people who worry they might not live the full seven years needed to make gifts IHT-free to their heirs under the ‘7-year rule’.

What’s the change to AIM shares?

Unfortunately, from April 2026, IHT relief on AIM shares will go down from 100% to 50%. You will still have to own the shares for two years for the exemption to take effect.

This is bad news for companies listed on the Alternative Investment Market. Between the Chancellor’s Budget on 30th October 2024 and 7th April 2025, the AIM market fell 18%. This is in contrast to a 6% dip in the FTSE 100. These figures suggest that AIM may be becoming less attractive to private investors.

What’s bad news for AIM companies is, in one respect, good news for government. According to a freedom of information request by a firm of solicitors, HMRC believes it will raise an extra £110 million in IHT per year when the AIM shares relief drops to 50%.

Should I sell my shares?

Before you rush out and sell your shares, it may be a good time to review your Inheritance Tax planning in general. For example, if you have made losses on some of your AIM investments, it may be worthwhile holding onto them for longer. Any future gains may be worth taking at the reduced rate of relief. The same may hold true for high-performing AIM shares.

That said, talking to an Inheritance Tax professional should help you to optimise your planning. For example, you may be able to make gifts out of surplus income, which aren’t subject to IHT. Alternatively, you could consider setting up an educational trust for your grandchildren’s school fees, make qualifying gifts to charity to reduce IHT to 36% (instead of 40%), or potentially gift money or valuable items using the seven-year rule.

The options open to you very much depend on your circumstances. But if you would like some Inheritance Planning advice, please do get in touch with one of our friendly experts today.