Inheritance Tax on Shares and Investments

Do you pay inheritance tax on shares and investments?

Not on their own. Inheritance tax looks at the value of the whole estate, so shares and investments are taxed only where the total estate exceeds the available bands. The ordinary nil-rate band is £325,000 per person, and 40% falls on value above the combined bands, or 36% where at least 10% of the net estate passes to charity (gov.uk, as at July 2026, subject to change). Transfers to a spouse or civil partner are generally exempt.

How are shares and investments valued?

Shares and investments are brought into the estate at their open-market value on the date of death, and added to everything else the person owned, less debts, before the tax-free bands are applied. Anything above the combined bands is taxed at 40%, or 36% where 10% or more of the net estate goes to charity (gov.uk, as at July 2026, subject to change). How a holding is valued depends on the type.

Type of holding	How it is generally valued
Listed shares (main market)	Market price at the date of death
Investment funds and unit trusts	Published price of the units held
Stocks and shares ISA	Value of the underlying investments
Unlisted company shares	Valuation of the holding, often needing professional input
AIM shares	Market price, though relief may reduce the taxable value

Type of holding

How it is generally valued

Listed shares (main market)

Market price at the date of death

Investment funds and unit trusts

Published price of the units held

Stocks and shares ISA

Value of the underlying investments

Unlisted company shares

Valuation of the holding, often needing professional input

AIM shares

Market price, though relief may reduce the taxable value

General approach based on gov.uk/inheritance-tax and gov.uk, valuing an estate, as at July 2026, subject to change. See our note on valuing an estate for the wider picture.

Business relief on shares

Some shares may qualify for business relief, which reduces their value when inheritance tax is worked out. Relief can be given at 100% or 50%, and the deceased generally must have owned the asset for at least two years before death (gov.uk, business relief, as at July 2026, subject to change). Shares in an unlisted company can qualify for relief, while AIM shares and shares giving control of more than half the voting rights in a listed company fall into the 50% category (gov.uk, what qualifies, as at July 2026, subject to change).

The relief is not open-ended. For deaths on or after 6 April 2026, a capped allowance applies to the combined value of assets qualifying for 100% relief, with the rate falling to 50% on qualifying value above the cap, and businesses that mainly hold investments or deal in shares do not qualify at all (gov.uk, as at July 2026, subject to change). Because the detail changed recently and depends on the holding, it is one area where many people take advice.

See our fuller note on business property relief for how the relief and the allowance work.

Are ISAs and investment funds subject to inheritance tax?

Generally yes. A stocks and shares ISA is tax-free for income and capital gains during your lifetime, but the investments inside it still form part of your estate for inheritance tax and are valued in the usual way (gov.uk, as at July 2026, subject to change). Investment funds, unit trusts and shares held directly are treated the same way. A surviving spouse or civil partner may inherit an ISA without an immediate inheritance tax charge, because transfers between them are generally exempt (gov.uk, as at July 2026, subject to change).

A worked example (illustration only). A widower dies owning a share portfolio worth £180,000, a stocks and shares ISA of £90,000, and other assets of £150,000, so £420,000 in total, and leaves everything to his daughter. His late wife left everything to him, so her unused bands may transfer. On his death the estate could draw on two nil-rate bands of £325,000 each, up to £650,000 combined, before any residence band is considered (gov.uk, as at July 2026, subject to change). In this illustration the £420,000 estate could fall within those bands, so no tax would arise on the shares or the ISA. Change the figures, the ownership or the beneficiaries and the answer changes, so this is general information rather than a calculation for any real estate.

Can you gift shares to reduce inheritance tax?

Giving shares away during your lifetime is possible, and an outright gift may fall outside your estate if you live for seven years after making it, with gifts made three to seven years before death potentially attracting taper relief on the tax due (gov.uk, rules on giving gifts, as at July 2026, subject to change). There is also an annual exemption of £3,000, small gifts of up to £250 per person, and an exemption for regular gifts made out of surplus income (gov.uk, as at July 2026, subject to change).

Gifting shares is not free of other consequences. Passing shares to someone other than a spouse or civil partner can be a disposal for capital gains tax, so a gain may be taxed even though no money changes hands, and giving away income-producing investments changes who receives that income. Because the tax picture spans more than inheritance tax, it can be worth discussing with a qualified professional before acting.

The seven-year rule. An outright gift may fall outside the estate if you live seven years after making it (gov.uk, as at July 2026, subject to change).

Annual exemption. Up to £3,000 of gifts each tax year can be given without being added to your estate (gov.uk, as at July 2026, subject to change).

Other taxes. A gift of shares can be a disposal for capital gains tax, which needs weighing separately.

What happens when you inherit shares?

You do not usually owe tax simply for receiving shares. Any inheritance tax due is generally settled by the estate before the shares reach you, rather than charged to you as the person inheriting (gov.uk, tax on property, money and shares you inherit, as at July 2026, subject to change). Later on, dividends from inherited shares can be subject to income tax, and selling them can bring capital gains tax into play, both of which are separate from inheritance tax (gov.uk, as at July 2026, subject to change).

Shares, investments and inheritance tax in Scotland and Northern Ireland

Inheritance tax is a UK-wide tax, so the £325,000 nil-rate band, the 40% rate and business relief apply across Scotland, England, Wales and Northern Ireland alike (gov.uk, as at July 2026, subject to change). What differs is the surrounding law. Scotland has its own succession rules, including legal rights that can give a spouse and children a fixed share of the moveable estate, which includes shares and investments, and it uses confirmation rather than a grant of probate. Where an estate touches more than one UK nation, it can be worth taking advice in each. For the wider picture, see our estate planning guide.

Frequently asked questions

Do you pay inheritance tax on shares?

Shares are counted as part of the estate, so tax arises only where the whole estate exceeds the available bands. The nil-rate band is £325,000 per person, with 40% charged on value above the combined bands (gov.uk, as at July 2026, subject to change). Some shares may qualify for business relief, and transfers to a spouse or civil partner are generally exempt.

Are AIM shares exempt from inheritance tax?

Not automatically exempt. Shares on the Alternative Investment Market may qualify for business relief, and for deaths on or after 6 April 2026 that relief falls into the 50% category, so it can reduce rather than remove the taxable value (gov.uk, as at July 2026, subject to change). Conditions, including a minimum ownership period, apply, so it depends on the holding.

Do you pay inheritance tax on an ISA?

Generally yes. A stocks and shares ISA is free of income tax and capital gains tax in your lifetime, but the investments inside it still form part of your estate for inheritance tax (gov.uk, as at July 2026, subject to change). A surviving spouse or civil partner can usually inherit an ISA without an immediate charge, because transfers between them are generally exempt.

Is there business relief on shares for inheritance tax?

There can be. Business relief may apply at 100% or 50% to qualifying shares, such as unlisted company shares, where the deceased owned them for at least two years before death (gov.uk, as at July 2026, subject to change). A capped allowance applies to 100% relief for deaths on or after 6 April 2026, and businesses mainly holding investments do not qualify.

Do I pay tax when I inherit shares?

Usually not at the point of inheriting. Any inheritance tax is generally paid by the estate before the shares reach you (gov.uk, as at July 2026, subject to change). Afterwards, dividends can attract income tax and selling the shares can attract capital gains tax, both separate from inheritance tax. The position depends on your circumstances, so many people take advice.

Can I reduce inheritance tax by gifting shares?

Gifting shares may reduce a future bill, as an outright gift can fall outside the estate after seven years, with taper relief possible on gifts made three to seven years before death (gov.uk, as at July 2026, subject to change). Because a gift of shares can trigger capital gains tax, it cannot guarantee a saving, so it can be worth discussing with a qualified professional first.

About Fairchild Oldfield

The Fairchild Oldfield team brings together estate planning, tax, independent financial advice and client care, working with families across England and Wales.

Fairchild Oldfield are estate planning specialists and will writers, not a firm of solicitors. This article is general information based on practical experience, not legal, tax or financial advice.

Important: This article is general information only and is not legal, tax or financial advice. Reading it does not create a professional relationship. It is based on the law of England and Wales, and other UK jurisdictions may differ. Figures and rules are current as at July 2026 and are subject to change. Investment products, including ISAs and investment bonds, are regulated, and any decision about them is best discussed with an FCA-authorised financial adviser. Before acting, many people choose to seek advice from a suitably qualified professional, such as a solicitor, a STEP practitioner, an accountant, or an FCA-authorised financial adviser, who can consider your individual circumstances.