Under the current inheritance tax (IHT) regime, our independently recommended IHT-Free Investment Plans provide IHT relief after 2 years of holding by investing in wide and diversified portfolios of qualifying funds and assets. These plans provide access to capital where required (they are, after all just another form of investment) along with providing the investor with a relatively smooth return and investment journey.
Since 6th April 2026, the underlying legislation which allows them to be IHT-free – Business Property Relief (BPR) – will be restricted. A 100% rate of relief will continue to apply for the first £1 million invested in such plans and, thereafter, relief will be at 50%. For the married couple, each spouse gets the £1 million 100% rate of relief, so £2 million in total. But any unused allowance will not be transferrable between them.
IHT Free ISAs / Portfolios – Restriction of relief for AIM shares
The Government reduced the rate of Inheritance Tax relief through BPR to 50% for shares that trade on the AIM market (down from 100% relief).
Holding an independently recommended, diversified portfolio of unquoted shares listed on AIM (in or outside an ISA) has been a long-standing recommended estate planning technique, particularly for older clients who are unable or unwilling to make gifts (perhaps due to access requirements) or who are concerned that they may not live the seven years required to make an IHT saving.
The reduction in the rate of BPR applicable to AIM shares introduces an effective IHT rate of 20% on the death of the investor (compared with the investment being fully mitigated for IHT purposes). Given the recent market challenges facing the AIM market, this is another blow to investors and choices will have to be made around when or if to switch to the IHT Free Investment Plans. Much will depend on individual circumstances and attitude to investment risk.
Get in touch for a relaxed chat about your situation
The new IHT rules and other updated financial planning considerations are complex. However, as always there are things you can do. Planning and taking action now could make all the difference.
Contact us to find out more about how the changes impact your situation and what your options are. Call 0117 3636 212 or email office@haroldstephens.co.uk
