Last updated: February 2026.
What is Business Relief?
Business Relief (BR, formerly Business Property Relief / BPR) is an inheritance tax (IHT) relief originally introduced to ensure family businesses didn't have to be broken up to pay IHT on the death of the owner. It applies to qualifying business assets owned for at least two years before death.
Two rates of relief apply:
- 100% relief: unquoted shares in a trading company, sole trader business, partnership interest, and shares in qualifying AIM-listed companies
- 50% relief: certain assets used by a business the deceased controlled (e.g. land or buildings)
The April 2026 cap, the big change
The 2024 Autumn Budget announced significant changes to BR taking effect from 6 April 2026:
| Asset value | BR before April 2026 | BR from April 2026 |
|---|---|---|
| First £1m of qualifying assets | 100% relief | 100% relief (unchanged) |
| Above £1m | 100% relief (unlimited) | 50% relief |
| Effective IHT rate above £1m | 0% | 20% (40% × 50%) |
The £1m allowance is per person and is not transferable to a surviving spouse. The cap applies to combined Business Relief and Agricultural Relief qualifying assets.
This change makes BR less powerful for very large estates, but for the majority of clients with £1m or less of qualifying business assets, the relief still provides full IHT exemption.
What qualifies for Business Relief?
The most common qualifying assets:
- Shares in a private trading company (100%)
- Sole trader business assets (100%)
- Partnership interest in a trading partnership (100%)
- Qualifying AIM-listed company shares (100%)
- Shares in unquoted trading companies (100%)
Disqualified businesses include those wholly or mainly dealing in securities, stocks or shares; land or buildings; making or holding investments. Investment businesses, buy-to-let, and most property letting do not qualify.
The two-year holding period
For BR to apply, you must have owned the qualifying asset for at least two years immediately before death. If you die during the two-year window, the relief is not available, the full value forms part of your taxable estate.
Replacement Relief can preserve the two-year clock: if you sell a qualifying asset and reinvest the proceeds in another qualifying asset within three years, the combined holding period can count.
Why AIM portfolios specifically?
For people without their own business, AIM-listed shares offer the most accessible route into BR. The benefits:
- Speed: two years to BR-qualifying status, compared to seven years for outright lifetime gifts
- You retain control: the shares remain yours; you can sell them, draw dividends, change managers
- No trust complexity: simpler than discounted gift trusts, loan trusts, or family investment companies
- ISA-compatible: can be held inside a Stocks and Shares ISA for additional income tax and CGT benefits
The risks, substantial and real
AIM shares are typically smaller, less liquid, and more volatile than FTSE 100/250 companies. The risks include:
- Capital loss: individual AIM companies can fail completely. Diversified portfolios reduce this but don't eliminate it.
- Sector concentration: AIM is heavily weighted toward smaller resource, tech and life-sciences companies, different to a typical UK equity portfolio
- Liquidity: selling large positions can move the share price; some companies have low daily trading volumes
- Status changes: a qualifying company can lose BR status, for example, if it shifts toward becoming an investment business, or moves from AIM to the main market
- Regulatory risk: the BR rules themselves could change again. The April 2026 cap was unexpected as recently as 2023.
For these reasons, AIM IHT portfolios are typically only suitable for people with substantial wealth where the absolute amount of IHT saved is large enough to justify accepting investment risk on a portion of the estate.
How AIM IHT portfolios are typically structured
Specialist managers run portfolios of 25–40 hand-picked AIM-qualifying companies. The portfolio is monitored continuously, if a company loses qualifying status, it is replaced. Typical features:
- Minimum investment usually £50,000–£100,000
- Annual management charges of 1–2%
- Held in the investor's name (not pooled), preserving BR eligibility
- Often available within an ISA or pension SIPP wrapper
How AIM portfolios compare to other IHT planning routes
| Strategy | Time to IHT-free | Loss of control | Investment risk | Complexity |
|---|---|---|---|---|
| Lifetime gift to family (PET) | 7 years | Total, gift is gone | None (cash out of estate) | Low |
| Discounted Gift Trust | Immediate discount + 7 years for full | Capital is in trust; you take income only | Investment-linked | Medium |
| Loan Trust | Growth is immediately outside estate | Capital is loaned, can be repaid | Investment-linked | Medium |
| AIM portfolio with BR | 2 years | None, shares remain yours | High | Medium |
| Whole-of-life insurance in trust | Immediate (pays out on death) | None, premiums only | None | Low |
Most large estates use a combination, for example, AIM portfolios for one tranche, lifetime gifts for another, and whole-of-life insurance to cover the residual IHT liability.
Who is BR/AIM planning suitable for?
Typical candidates:
- Investors aged 65+ who want to keep control of capital but reduce future IHT exposure
- People who can tolerate higher investment risk on a portion of their wealth
- Those for whom the seven-year gift route is unattractive (e.g. health concerns, or wanting to retain access)
- Estates above the available nil-rate bands by enough that the saving justifies the investment risk
Not usually suitable: anyone who would lose sleep over the value falling, people without other sources of capital, or estates that aren't likely to face significant IHT.
Frequently asked questions
Are all AIM shares eligible for Business Relief?
No. Around half to two-thirds of AIM-listed companies qualify. Excluded sectors include investment businesses, property dealing/letting, and most financial services. Specialist AIM IHT portfolio managers screen for qualifying companies.
What happens if I die before the 2-year period is up?
The shares don't qualify for BR and the full value forms part of your taxable estate. Replacement relief allows the 2-year clock to continue if you sell qualifying shares and reinvest in others within 3 years.
Can I take income from an AIM portfolio?
Yes. Some AIM companies pay dividends, although AIM yields are generally lower than the FTSE 100. Most BR-focused portfolios target capital growth rather than income.
Do AIM portfolios qualify for ISA tax wrapping?
Yes. AIM shares can be held inside a Stocks and Shares ISA, combining income tax-free and CGT-free growth with BR for IHT purposes, though if the ISA allowance is used for AIM shares specifically, you may lose the diversification benefits of a broader portfolio.
What if I want to sell an AIM portfolio in the future?
AIM shares can be sold at any time, though liquidity varies by company. You'll then have proceeds that are back in the IHT net (unless reinvested into other qualifying assets within 3 years). Capital gains apply at standard CGT rates.