What the December Allowance Changes and April 2026 AIM Reforms Mean for Your Estate
On 23rd December, the Government (quietly) announced a significant change to inheritance tax (IHT) planning, increasing Agricultural Property Relief (APR) and Business Property Relief (BPR) allowances from £1 million to £2.5 million per individual, with the important addition that unused allowances can now be transferred between spouses or civil partners.
For married couples, this may allow up to £5 million of qualifying assets to pass free of IHT, subject to current legislation and HMRC interpretation, and provided qualifying conditions continue to be met, a meaningful opportunity for families with established wealth.
However, this opportunity must be considered alongside a less favourable change, particularly for those relying on AIM shares for inheritance tax planning. From April 2026, the tax treatment of AIM shares will change significantly, altering their effectiveness as an IHT solution.
Business Relief: the foundation of the opportunity
Business Relief allows qualifying business assets to fall outside an individual’s estate for IHT purposes after two years of ownership, provided the assets are still held at death.
Traditionally, this has included:
- Unquoted trading businesses
- Certain unlisted or private companies
- AIM-listed shares
The recent changes do not remove Business Relief, but they change how much relief is available and to which assets it applies, making structure and investment selection more important than ever.
The April 2026 changes: what happens to AIM shares?
From 6 April 2026, the rules for AIM shares will change in three critical ways:
1. Reduced IHT relief
- Business Relief on qualifying AIM shares will fall from 100% to 50%
- This results in an effective IHT rate of 20% on AIM holdings (half of the standard 40%)
2. No access to the new allowance
- AIM shares will not qualify for the new £1 million combined allowance for unquoted business and agricultural property
- That allowance provides 100% relief, but AIM investments are explicitly excluded
3. Greater uncertainty at death
- Relief will still depend on the shares qualifying at the date of death
- Corporate failure, delisting, or structural changes could remove relief entirely
These changes significantly weaken the historic case for AIM portfolios as a primary inheritance tax planning tool, particularly for older investors.
Why AIM portfolios now face harsher outcomes
Even before April 2026, AIM-based IHT planning carried notable risks. The new rules amplify these concerns.
Key issues include:
- Market volatility: AIM shares can fluctuate sharply in value
- Concentration risk: portfolios often hold a limited number of companies
- Business failure risk: smaller companies are more vulnerable to economic shocks
- Reduced tax efficiency: a 20% effective IHT charge materially changes outcomes
For an investor prioritising certainty, the combination of market risk and partial IHT relief can undermine long-term estate planning objectives.
Non-AIM Business Relief solutions: unchanged and increasingly relevant
In contrast, non-AIM Business Relief solutions remain unaffected by the April 2026 changes and continue to benefit from 100% relief, subject to qualifying conditions.
These solutions typically invest in underlying trading activities, rather than listed shares, and are designed specifically for estate planning.
Examples of providers include:
- Time Advance – asset-backed lending to UK trading businesses
- Foresight ITS – infrastructure, renewables, and contracted income assets
- Triple Point – SME lending, leasing, and specialist finance
These strategies often focus on:
- Asset-backed or secured investments
- Contractual income streams
- Lower correlation to equity markets
- Capital preservation alongside tax efficiency
Importantly, these investments do qualify for the expanded £2.5 million allowance, and unused allowances can be transferred between spouses.
Comparing outcomes: AIM vs non-AIM Business Relief
For some investors, non-AIM Business Relief solutions may offer different risk and return characteristics compared to AIM portfolios, depending on individual objectives and circumstances.
For many clients in later life, certainty of outcome is at least as important as maximising relief.
What this means for IHT planning
The increase in allowances presents an opportunity, but also raises the stakes. Larger sums invested into unsuitable structures can magnify risk.
Key considerations include:
- Health and time horizon
- Income and liquidity needs
- Overall estate size
- Tolerance for capital volatility
- Desire for predictability in estate planning
For many, a structured, non-AIM Business Relief solution, potentially combined with other planning strategies, offers a more robust approach than relying on AIM shares under the new rules.
Final thoughts
The December changes have expanded the scope for inheritance tax planning, but the April 2026 reform to AIM shares materially alters the landscape.
While AIM portfolios may still have a role for certain investors, they are no longer the straightforward solution they once were. Non-AIM Business Relief solutions, by contrast, remain fully effective and increasingly relevant within the new allowance framework.
As always, careful advice is essential. The right strategy balances tax efficiency with capital security, liquidity, and peace of mind, particularly in later life.
You can contact us to arrange an informal chat via the contact form below.
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This blog is for information only and does not constitute financial, tax or investment advice. Individual circumstances vary and you should seek regulated advice before taking action.
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Business Relief investments are high-risk, illiquid and not suitable for all investors. Capital is at risk, and relief depends on assets qualifying at death under prevailing legislation.