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AIM-listed Company

Also known as: Alternative Investment Market Company, AIM Shares

Definition

An AIM-listed company is a business traded on the Alternative Investment Market—a sub-market of the London Stock Exchange for smaller or emerging companies—that's treated as 'unquoted' for UK inheritance tax purposes.

Understanding AIM shares matters for estate planning because they qualify for Business Property Relief, offering inheritance tax advantages despite being publicly traded.

What Does AIM-listed Company Mean?

The Alternative Investment Market (AIM) is operated by the London Stock Exchange and was established in 1995 as a platform for smaller, emerging companies that don't meet the stringent requirements for listing on the Main Market. Companies admitted to trading on AIM face less onerous regulatory requirements—they don't need a minimum market capitalisation, three-year trading record, or 25% free float of shares. However, they must appoint a Nominated Adviser (Nomad) for ongoing oversight. Since inception, over 3,000 companies have traded on AIM, raising over £90 billion in capital.

For UK tax purposes, AIM shares are classified as 'unquoted' or 'not listed on a recognised stock exchange' under HMRC definitions effective from 1 April 1996. This seemingly paradoxical classification—publicly traded shares treated as unquoted—is what historically made AIM shares eligible for 100% Business Property Relief from inheritance tax. The October 2024 Budget fundamentally changed this landscape: from 6 April 2026, AIM shares qualify for only 50% Business Property Relief, creating an effective inheritance tax rate of 20% (half the standard 40% rate). Crucially, AIM shares don't benefit from the new £1 million BPR allowance that applies to completely unlisted shares. For James, a 58-year-old investor holding £1.2 million in qualifying AIM shares, this means his potential inheritance tax bill increased from £0 under previous rules to £240,000 under the new regime—a substantial change requiring urgent estate plan revision.

AIM shares can be held within an ISA wrapper, combining income tax and capital gains tax advantages during lifetime with inheritance tax relief on death. However, the ISA status itself doesn't exempt holdings from inheritance tax—the relief comes solely from the Business Property Relief qualification of the underlying shares. Not all AIM companies qualify for BPR: companies dealing mainly in land, buildings, or investment holding are excluded. Additionally, if an AIM share is dual-listed on a recognised foreign stock exchange (such as NASDAQ), it becomes 'quoted' for UK tax purposes and loses BPR eligibility entirely. The two-year minimum holding period before death remains a requirement for any BPR claim.

AIM shares carry inherently higher investment risk than Main Market shares due to less regulatory oversight, earlier-stage businesses, and lower liquidity. Professional advice is essential both for assessing investment suitability and verifying specific companies' BPR qualification. Around 40% of estates claiming BPR in 2021-2022 included AIM shares, representing approximately 20% of total BPR value claimed (pre-Budget 2024 data). Anti-forestalling rules apply to gifts made on or after 30 October 2024—if the donor dies after 6 April 2026, the new 50% relief rate applies even to pre-2026 gifts.

Common Questions

"Do AIM shares still qualify for inheritance tax relief after the 2024 Budget changes?" Yes, but at a reduced rate. From April 6, 2026, AIM shares qualify for 50% Business Property Relief (down from 100%), resulting in an effective inheritance tax rate of 20% instead of 40%. You must still hold the shares for at least two years before death. Those dying before April 2026 can still benefit from the previous 100% relief.

"Are AIM shares considered quoted or unquoted for tax purposes?" AIM shares are treated as 'unquoted' or 'not listed' for UK inheritance tax and Business Property Relief purposes, despite being traded on a recognised market. This classification is what allows them to qualify for Business Property Relief, unlike shares on the London Stock Exchange Main Market which are fully quoted.

"Can I hold AIM shares in an ISA for inheritance tax planning?" Yes, AIM shares can be held within an ISA wrapper, combining income tax and capital gains tax benefits with inheritance tax relief. However, ISAs themselves do not fall outside your estate for inheritance tax purposes—the relief comes from the Business Property Relief qualification of the underlying AIM shares, not the ISA wrapper.

Common Misconceptions

Myth: ISAs are automatically exempt from inheritance tax, so AIM shares in an ISA are completely tax-free when I die.

Reality: ISAs do not fall outside your estate for inheritance tax purposes. While ISAs provide income tax and capital gains tax benefits during your lifetime, they're included in your estate valuation. The inheritance tax relief on AIM shares comes from Business Property Relief, not from the ISA wrapper. From April 2026, even qualifying AIM shares will only receive 50% relief, creating an effective 20% inheritance tax rate.

Myth: All AIM shares automatically qualify for Business Property Relief because they're on the Alternative Investment Market.

Reality: Not all AIM-listed companies qualify for Business Property Relief. Companies that deal mainly in land, buildings, or investment holding are excluded from BPR. Additionally, if an AIM share is dual-listed on a recognised foreign stock exchange, it becomes 'quoted' for UK tax purposes and loses BPR eligibility entirely. Each company's qualification must be verified individually.

  • Business Property Relief: The inheritance tax relief mechanism that AIM shares qualify for, providing 50% relief from April 2026 (reduced from 100%).
  • Unquoted Company: AIM shares are treated as 'unquoted' for tax purposes despite being publicly traded, distinguishing them from Main Market shares.
  • Company Shares: AIM shares represent a specific category of company shares with unique tax treatment for inheritance purposes.
  • Share Valuation: The process of determining AIM share values for inheritance tax purposes when valuing estates for probate.

Need Help with Your Will?

Complex shareholdings like AIM investments demand clear documentation in your will. Understanding how these assets qualify for Business Property Relief and ensuring your executors can properly identify and value them is crucial for effective estate administration.

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Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.