AIM Portfolios and the New GBP 1m IHT Cap: What UK Wealth Advisers Need to Know in 2026/27

The cliff edge for AIM IHT portfolios arrived in the Autumn 2024 Budget and took effect on 6 April 2026. Every qualifying share in a HNW client’s AIM IHT bag now attracts 50 percent Business Property Relief, not 100 percent, with no allowance to soften the change. The effective IHT rate on those holdings has gone from zero to 20 percent overnight. For clients who built AIM portfolios as the simplest two-year route to full IHT exemption, the proposition has just been halved.

The change sits inside a broader rewrite of Business Property Relief and Agricultural Property Relief that introduces a new GBP 1m combined allowance from the same date. The allowance gives 100 percent relief up to GBP 1m and 50 percent above. AIM shares are explicitly excluded from the allowance: they are capped at 50 percent from the first pound. That asymmetry, more than the headline rate, is what reshapes adviser conversations this tax year.

This piece walks through what changed, how the maths actually works, and what to do with clients who hold AIM IHT portfolios today.

What HMRC and HM Treasury actually said

The reforms were announced at the Autumn Budget 2024 and confirmed in the Overview of Tax Legislation and Rates. The detailed policy paper, Agricultural property relief and business property relief reforms, sets out the structure that applies from 6 April 2026:

• A new GBP 1m allowance applies per individual to qualifying APR and BPR property combined, giving 100 percent relief up to the cap.
• Above the GBP 1m allowance, qualifying property attracts 50 percent relief, producing an effective IHT rate of 20 percent on the excess.
• The allowance is not transferable between spouses or civil partners by default; each individual has their own.
• Shares not listed on a recognised stock exchange include AIM. Under the new rules, qualifying shares that are not listed on a recognised stock exchange attract 50 percent relief from the first pound, with no allowance applied.

The published HMRC Inheritance Tax Manual still describes the long-standing two-year ownership requirement and the trading company tests that determine whether a holding qualifies for BPR in the first place. Those gating tests are unchanged. What changed is the rate that applies once you are through them.

The maths on a typical HNW client

The effect is cleanest seen in pounds. Take a client with a GBP 500,000 AIM IHT portfolio, held for at least two years, qualifying for BPR.

Period	Relief rate	Effective IHT rate	IHT on GBP 500,000
Pre 6 April 2026	100 percent	0 percent	GBP 0
From 6 April 2026	50 percent	20 percent	GBP 100,000

For a couple holding GBP 500,000 each, the change produces an additional GBP 200,000 of IHT exposure that did not exist a year ago. Scale that to a GBP 2m AIM bag in larger HNW estates and the figure becomes GBP 400,000. None of this is recoverable through any allowance: the GBP 1m allowance does not reach AIM holdings.

The GBP 1m allowance: what it covers and what it does not

The new allowance is a useful planning lever for clients with operating businesses or farmland, and it materially complicates the AIM conversation because clients hear “GBP 1m allowance” and assume it covers their AIM portfolio. It does not.

Asset class	Relief on first GBP 1m	Relief above GBP 1m	Effective IHT above cap
Qualifying unquoted trading company shares	100%	50%	20%
Qualifying business assets used in a trade	100%	50%	20%
Qualifying farmland (APR)	100%	50%	20%
AIM shares qualifying for BPR	50%	50%	20%
Non-qualifying assets	0%	0%	40%

Two practical points follow. First, the allowance applies to the combined value of APR and BPR qualifying property, not to each separately, so a farmer who also holds an unquoted trading company has to choose how to use the GBP 1m. Second, AIM shares sit in their own bucket and do not consume any of the allowance, but nor do they benefit from it. The allowance is per individual and does not appear to be transferable between spouses on death in the same way the nil rate band and residence nil rate band are, although further design points are still being consulted on.

The behavioural risk: doing nothing

The most common response to a change of this size is to do nothing. Clients defer; advisers wait for the next review. That stance now carries a measurable cost. Every year an existing AIM IHT holding stays in place, the client funds a 20 percent IHT exposure that did not exist before, with the equity volatility and AIM-specific liquidity profile sitting on top.

The right starting point for any client with material AIM IHT exposure is a written reassessment that compares the post-change after-tax outcome against a small set of alternatives. The reassessment is a Consumer Duty artefact as well as a planning artefact: under Consumer Duty, fair value is measured net of tax, and a strategy that delivered zero IHT yesterday and 20 percent IHT today should be documented, not assumed.

Five planning routes worth modelling

For most HNW clients the alternatives sit in five buckets. None is universally better than AIM: each has trade-offs in liquidity, control, and time to relief.

1. Stay invested, accept 20 percent. For clients whose AIM bag is a small fraction of the estate and who value the two-year qualifying period and ISA-compatible structure, the change is annoying rather than fatal. A 20 percent effective rate is still 20 percentage points better than the 40 percent that applies to most assets.
2. Unquoted BPR-qualifying trading companies. Direct or pooled investment into qualifying private trading companies attracts 100 percent relief up to the GBP 1m allowance. Liquidity and selection risk are considerably higher than AIM, and the allowance now caps the benefit, but the post-change relief profile is materially better. This sits naturally within a private markets allocation for clients who already hold alternatives.
3. Lifetime gifting and the seven-year clock. Outright gifts to individuals fall out of the estate after seven years, with taper relief from year three. For older clients with AIM portfolios held for the IHT shelter, an early gift can outperform AIM at the new rate, particularly when paired with a normal-expenditure-out-of-income exemption.
4. Pensions used as IHT vehicles. Pension funds remain outside the estate under current rules, although a consultation on bringing unused pension funds within IHT is open. For the time being, undrawn pensions are usually the most tax-efficient asset to leave on death. Where capacity exists, redirecting future contributions away from AIM and into pension funding remains worthwhile. The mechanics belong in the wider new tax year planning review.
5. Whole-of-life cover written in trust. For clients unwilling to give away assets, a guaranteed life policy in trust can fund the new 20 percent liability on a known AIM portfolio. The cover is not cheap, but it gives the family certainty and avoids a forced sale of AIM shares at death.

These should be modelled against the client’s current AIM exposure, not chosen on theory. Most clients end up with a blended answer: keep some AIM, gift some, fund some via pension, and insure the residual.

What advisers should do this quarter

A practical sequence for the next three months:

1. Identify clients with AIM IHT exposure above GBP 250,000. Below that level the effective change is a manageable absolute number; above it, the planning conversation is necessary.
2. Quantify the change in pounds. Show each client the IHT exposure that has appeared on their existing AIM holdings as a result of the rate change, alongside the assumed life expectancy and the resulting expected charge.
3. Re-document fair value under Consumer Duty. Where AIM IHT was recommended on the basis of full BPR, the file note should reflect the new 50 percent rate and confirm the client has been informed.
4. Commission a written alternatives review. Cover the five routes above and rank by suitability for the client. For couples, model the two estates separately, given the per-individual GBP 1m allowance.
5. Avoid forced disposals. Selling AIM shares purely because of the rate change can crystallise loss positions, reset qualifying periods, and expose the client to CGT outside an ISA. The reassessment should explicitly flag where doing nothing is the correct answer.

For practices doing this at scale, a centralised investment proposition is the right place to set the post-change house view on AIM: which managers, what concentration, how it sits alongside other BPR-qualifying assets within the GBP 1m allowance.

Where this sits in the bigger picture

The reform is not isolated. Read alongside the consultation on bringing unused pension funds within IHT, the frozen nil rate bands, and the residence nil rate band taper, the direction of travel is clear: more HNW estates will pay more IHT, with fewer simple shelters available. AIM IHT portfolios are the loudest casualty in 2026, but they will not be the last. Advisers who position the rest of their planning, gifting, trust structuring, pensions, and insurance around the new rules will deliver visibly better outcomes than those who treat the change as a single-line update.

For deeper context on how this folds into client-level tax planning across wrappers and asset classes, see the tax implications of DFM portfolios for the rebalancing-and-CGT side of the picture, and intergenerational wealth transfer for the family conversation that usually follows a material change in IHT exposure. For the underlying gating tests on what qualifies for BPR in the first place, the HMRC manual on relevant business property remains the primary reference.

The two-year qualifying clock keeps running. For clients with AIM holdings already past the threshold, the question is no longer whether they qualify for BPR; it is whether the new 50 percent relief is enough to justify keeping the position, given everything else available in their plan.