The Chancellor’s decision to halve Inheritance Tax (IHT) relief on qualifying investments in the UK’s Alternative Investment Market (AIM) has changed the estate planning landscape for thousands of older investors, say advisers at Azets.

The reduction, from 100% to 50%, took effect on 6 April 2026 after being announced in the Autumn 2024 Budget.

Over many years, qualifying AIM portfolios, often held within stocks-and-shares ISAs, have offered investors tax-efficient income and growth alongside full IHT relief after two years of ownership.

Crucially, they also allowed investors to retain control of, and access to, their capital, making them a common option for those wanting a potential nest egg for future care costs.

The relief is seen as an efficient way to encourage investment in smaller, growing or speculative companies that feature on AIM, often ahead of a full public listing on the London Stock Exchange.

Since its founding in 1995, AIM-listed companies have collectively raised more than £60 billion, with the potential for tax relief appealing to many individual investors.

Graeme Dreghorn, Glasgow-based wealth management director at Azets, said: “While much attention has been paid to the fact that pensions will come into the scope of IHT from April 2027, there has been less focus on the AIM and IHT issue, but people are now beginning to recognise it.

“The availability of IHT relief has helped keep this market attractive. For families looking to preserve wealth while retaining access to capital, AIM portfolios have been a useful planning tool, but the landscape has now changed significantly.”

He added: “The question many investors in their 70s and 80s are now asking is whether to stick or twist. We have been having more of these conversations in recent months. In simple terms, clients may either have to accept an unexpected IHT exposure despite careful planning or consider moving into other qualifying solutions if preserving Business Property Relief remains a priority.

“A key consideration is how best to manage future care costs alongside succession planning. The answer is rarely black and white because each option involves a different balance of risk, liquidity and tax efficiency.

“The first point to stress is that AIM investments have not lost their usefulness entirely. A 50% IHT relief may remain meaningful, particularly for those already invested in these strategies. AIM portfolios still allow investors to retain ownership and access while obtaining partial IHT relief after two years.

“However, the new reduction in relief is a fundamental change that is leading to very reasonable concern among investors. AIM portfolios invest in smaller and often more volatile companies than those in larger markets like the FTSE 100. Historically, many investors accepted that added risk because of the IHT advantage. Now, many are asking whether the remaining tax benefit still justifies that level of investment risk. Recent market data1 has shown that more than £140 million has left AIM portfolios this year, which is nearing 10% of the overall market for private investors. This shows some investors are taking action, but with £1.7 billion still invested, many are either not aware of these changes, or are still coming to terms with making this challenging decision.

“For those who decide to twist, one option is to consider other investments that may qualify for Business Property Relief. These specialist solutions invest directly in smaller companies or sectors such as energy, infrastructure and asset-backed businesses, which may allow investors to access 100% relief after two years provided all qualifying conditions are met. There is always the continued risk with these investments that the eligibility for Business Property Relief is not guaranteed and depends on the underlying investments continuing to meet HMRC requirements. As such, these remain higher-risk strategies, but for some investors they may offer a different risk profile from AIM while preserving the existing tax benefits with the potential upside of full relief after the qualifying period.

“There are a range of other options, including insurance, trusts and gifting. Frozen IHT thresholds and rising asset values mean more families are being drawn into the tax net, often unexpectedly. This all comes before the pension changes in April 2027, meaning that many estates that would not historically have faced significant liabilities are now encountering potential bills running into hundreds of thousands of pounds. It might seem like a niche area of tax planning, but changes in rates and reliefs have a big impact.”

For some investors, Graeme said the correct answer may indeed be to stick. He continued: “Where people have owned the assets beyond the two-year qualifying period, are comfortable with investment risk and do not require immediate access to capital, retaining an AIM portfolio may still make sense. In particular, those in poor health who are unlikely to survive the seven-year gifting period may still find AIM relief comparatively attractive.

“For clients concerned about funding future care costs, liquidity and capital preservation are becoming more important considerations. Having an exposure to higher-risk AIM shares solely for tax reasons may no longer be appropriate.

“Our key message is that investors should now view the tax relief available through AIM investments as just one potential planning tool among several, rather than a standalone solution. Whether you stick or twist on keeping your ISA funds in AIM, you still have to weigh up the other critical factors, such as your health, income needs, family circumstances and the overall size of the estate. The decision will depend on individual circumstances, and professional advice should always be sought.”

Important: Investments in AIM-listed companies and Business Property Relief qualifying investments are higher risk and can be volatile. The value of investments may go down as well as up, and investors may get back less than originally invested. These investments may also be less liquid, meaning they cannot always be easily sold. Tax treatment depends on individual circumstances and may change. BPR qualification is not guaranteed and depends on investments maintaining their qualifying status. Azets Wealth Management is authorised and regulated by the Financial Conduct Authority.