This article is written by:
Rebecca Ward-Howes
Head of Product
The planning case
Since the changes to Business Relief (BR) were first announced in 2024, there is one question I hear more than any other: “if the relief has fallen to 50%, does AIM IHT still make sense?”.
It’s an important question and it deserves a proper answer.
The short version is this: the change does not automatically undermine the case for AIM. For many clients, AIM remains a compelling estate planning tool because investment returns can matter just as much as tax relief.
What has changed is not the relevance of AIM, but the nature of the conversation. Combined with the changes to the Inheritance Tax (IHT) treatment of pensions, advisers are increasingly helping clients navigate a more nuanced planning landscape, understanding what they want to achieve and identifying the estate planning solutions best suited to their circumstances.
Understanding what has actually changed
From April 2026, AIM shares qualify for 50% BR. In practical terms, this means an effective IHT rate of 20%.
This is clearly less generous than the previous regime. However, it is still materially better than the 40% rate applied to an unplanned estate.
The mistake I sometimes see is treating this as a binary comparison: 0% IHT (unquoted) versus 20% IHT (AIM).
That framing misses a critical part of the picture.
Growth can change the outcome
One of the most important insights from our analysis is how much growth alters long-term outcomes.
In the scenarios we modelled, an AIM portfolio growing at 8% per annum produced a higher net estate value over ten years than a capital-preservation unquoted portfolio growing at 3.5% - even after applying the 20% IHT charge.
This demonstrates an important planning principle: over longer time horizons, growth can outweigh differences in tax treatment.
Of course, higher returns are not guaranteed and AIM portfolios can carry greater volatility than capital-preservation-focused unquoted strategies. Future performance can never be relied upon. However, when assessing suitability, advisers should consider both the tax treatment and the client's expected investment return over their likely planning horizon.
That doesn’t mean AIM is always the better answer, but it does mean the comparison is not as straightforward as it might first appear.
Time horizon is everything
The key variable is time.
- For younger clients or those in good health, where a 10-year investment horizon is realistic, the growth potential of AIM becomes highly relevant.
- For older clients or those with shorter horizons, the certainty of full relief from unquoted strategies may be more appropriate.
This is not about one solution being “better” than others, it is about matching the solution to the client’s circumstances.
ISA eligibility remains a powerful differentiator
AIM offers something unquoted solutions can’t rival: ISA compatibility.
Clients can move existing ISA assets into an AIM portfolio and - after two years - benefit from BR, while retaining the income and CGT advantages of the ISA wrapper.
For clients who have built up substantial ISA portfolios over time, this is a highly practical and often overlooked planning tool.
Why the conversation is only getting more important
There is also a broader shift underway. From April 2027, unused pension funds will be brought into scope for IHT.
For many clients, pensions have historically been the cornerstone of estate planning. That is changing and advisers will need to look more closely at alternative tools - including AIM.
As a result, conversations that were previously focused on pensions are likely to become broader discussions around asset location, estate structuring and long-term intergenerational planning.
A more sophisticated conversation
Estate planning has become more nuanced, and that's exactly where advisers add value.
Through our conversations with advisers, one thing is clear: the focus is moving beyond tax rates and towards overall client outcomes.
Different clients will require different solutions, but for many, AIM's combination of growth potential, BR and ISA eligibility means it continues to play an important role.
The question isn't what rate of IHT applies. It's what strategy best fits the client’s objectives and what is most likely to leave beneficiaries better off.
Download The Case for AIM for our full scenario modelling, including how growth, time horizons, and tax treatment interact. Our in-depth insight offers a practical framework for identifying where AIM fits into estate planning.
Important notice
Past performance is not a reliable indication of future performance.
This article is intended for financial advisers and has been approved and issued as a financial promotion by Downing. Any personal opinions expressed are subject to change and should not be interpreted as advice or a recommendation. Capital is at risk and investors should note that their investments can rise as well as fall and investors may not get back the full amount invested. Downing is a trading name of Downing LLP. Downing LLP is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 545025). Registered in England and Wales (No. OC341575). Registered Office: 10 Lower Thames Street London EC3R 6AF.
