The £10bn Industry the Treasury Didn't Mean to Build
April's inheritance tax reforms were meant to tighten the rules on family businesses. Instead, they've supercharged a £10bn class of private schemes built almost entirely around dodging IHT. Here's what's actually going on.
Most people have never heard of Fern Trading, Averon Park, or Elm Trading. They don't advertise. Their websites are sparse. Their marketing is aimed at financial advisers, not retail investors.
Between them and a handful of similar schemes, they manage well over £10 billion of mostly elderly British savers' money—a figure that has roughly doubled in four years. The reason is unromantic but simple: they exist almost entirely to help investors avoid inheritance tax.
April 2026's reforms have just made them more attractive, not less. That probably wasn't the plan.
How we got here
Business Property Relief (BPR) is a 1970s carve-out designed to stop families having to break up trading businesses to pay a 40% IHT bill. Hold qualifying business assets for two years, still own them at death, and they fall outside the IHT net. Sensible, uncontroversial, well-targeted.
In the 1990s, the relief was extended to AIM, the London Stock Exchange's junior market. The logic was patient capital for smaller UK companies. For three decades, an AIM portfolio doubled as a tax shelter and a bet on UK growth.
This April, that arrangement was redrawn. And not in a way the Treasury seems to have fully thought through.
What actually changed
Two regimes now sit side by side.
Private trading companies. The first £2.5m of qualifying assets per person still gets 100% relief. Spouses can transfer unused allowance, taking a couple to £5m. Above that, relief halves and the effective IHT rate is 20%.
AIM shares. 100% relief is gone. AIM holdings now get 50% relief in all cases—an effective 20% IHT rate from the first pound.
The headline framing was "fairness" and "preventing the wealthiest from passing down unlimited business assets tax-free." The actual effect is less tidy. Two investors with identical-sized portfolios can now face very different IHT bills depending on whether their qualifying assets sit in private companies or on AIM. That gap is the whole story.
The schemes that grew up around the rules
A small industry has built itself around BPR over the past decade. The structure is always the same. A fund manager creates a private company holding assets that qualify for business relief—operational wind farms, solar parks, fibre networks, care homes, small-company lending. Asset-backed, predictable, deliberately unexciting. The manager issues shares to investors looking to shelter capital from IHT, with target returns of 2–4%. Hold for two years, qualify for relief. When you die, new investors buy the shares. The manager runs an internal "matched bargain" market to keep the wheels turning, with a credit line for when sellers outpace buyers.
The scale is striking. Octopus Investments' Fern Trading is valued by its manager at around £3.4bn. Foresight's Averon Park is close to £1.9bn. Time Investments' Elm Trading is around £1.5bn. Triple Point's two schemes hold over £1bn between them. Downing's two schemes account for nearly £900m. A long tail of smaller funds fills out the rest.
None of them existed at this scale ten years ago. They exist now because the rules made them possible.
Why April was a tailwind, not a headwind
Before April, AIM portfolios and private BPR schemes offered the same IHT outcome. It was a real choice—AIM if you wanted some equity-style upside, private schemes if capital preservation came first. Now there is no choice. AIM offers 50% relief on anything; private schemes offer 100% relief on the first £2.5m. For an investor whose primary goal is sheltering capital from IHT, the maths only points one way.
Industry estimates put the swing at hundreds of millions of pounds in the past year alone, flowing from AIM into private schemes. AIM, already battered by years of poor performance and an exodus to the main market, has lost one of the few structural reasons some investors had to hold it.
The original case for AIM relief was that it pushed risk capital toward smaller UK companies. The new regime instead pushes capital toward private schemes built around already-operational infrastructure—assets that, in many cases, would have been built and financed by the private sector anyway. The Treasury is now subsidising the construction of wind farms it would have got for free.
What this looks like up close
The schemes themselves aren't a scam. They're real businesses doing real things. But anyone considering one should be honest about four things.
Valuation is largely an internal exercise. Unlike a listed share, the price isn't set by an open market. It's set by the manager, supported by independent valuers, but without continuous external price discovery. Some schemes carry valuations meaningfully above their stated net assets. If their underlying portfolios were listed, they'd likely trade at a discount. None of this is necessarily wrong. It's just a very different proposition from a tracker fund.
Liquidity depends on the next investor. The matched-bargain model works while new money keeps coming in. If a tax change—or a shift in adviser sentiment—turned that flow off, schemes would have to sell underlying assets to meet redemptions. Wind farms don't sell quickly, and forced sellers rarely get good prices. The credit lines help. They aren't infinite.
The rules themselves are political. Business relief has survived 50 years, but April showed that nothing is permanent. Investors in BPR schemes are, in effect, making a long-term bet on a tax rule. That bet has been good for decades. It will not necessarily be good forever.
The "return" you're chasing is the tax saving. A 2–4% target on low-risk assets is fine. But the real economics are the IHT saved, not the dividend earned. Which means: if your estate wouldn't actually be liable for much IHT—or could be brought below the threshold by simpler means—the case collapses.
Who these schemes really suit
The clearest case is someone with a genuine IHT problem they can't solve through gifting alone, who already has core wealth in liquid mainstream investments, who can lock up capital long-term without flinching, and who understands they're buying a tax outcome, not an investment.
Outside that, the case gets weaker fast. If your IHT exposure could be managed with simpler tools, or if your liquid wealth is limited, or if anyone is selling these to you primarily as an "investment," the answer is probably no.
A note on AIM
If you already hold an AIM IHT portfolio, the question of whether to switch isn't binary. AIM's relief has been halved, not abolished. Fifty per cent relief on companies you actually want to own may still beat 100% relief on a private scheme whose underlying assets you don't fully understand. The right answer is rarely a wholesale switch, and it's an adviser conversation.
The wider lesson
The 2026 reforms have produced an oddity: a tax regime that nudges capital away from one of the riskier corners of the UK stock market and into a £10bn parallel universe of private schemes built specifically around the rules. The political case for the changes was that the wealthiest were getting too much relief. The practical effect was to redirect their capital somewhere even less productive.
For families thinking about their own planning, the message is more grounded. Business relief is a real tool. It suits some situations very well and others not at all. It is one tool among several—and rarely the first one to reach for.
How LifeFolio™ helps
This is exactly the kind of decision LifeFolio™ is built around. For £2.99 a month, our digital vault helps you:
- See your estate as a whole. All your assets, debts, policies, pensions, and ownership structures in one place. You can't plan around an IHT bill you can't actually see.
- Find the levers that matter. A clear view of which planning tools—gifting, pension nominations, residence nil-rate band, charitable giving, business relief—actually move the needle for your situation.
- Keep records that hold up. HMRC's enforcement net is tighter than it has ever been. Sloppy admin is now expensive admin.
- Share securely with the people who'll need it. Decide who sees what, now and later, without giving up control.
Subscribers also get access to professionally reviewed, legally binding wills for £60—a fraction of typical solicitor fees, and the foundation any of this planning needs to work.
The bottom line
The Treasury wanted to tighten relief on the wealthiest. It succeeded—technically. It also handed a £10bn industry a structural advantage, redirected capital away from listed UK growth companies, and created a parallel market priced largely by the people running it. Not a vintage piece of policy.
For anyone planning around their own estate, none of this changes the basics. Know what you own. Know what you owe. Use the simple tools first. And get the paperwork right—because the rules will keep moving, and the planning that survives is the planning that's documented.
If you'd like a clear view of where your estate currently stands, take the Estate Readiness Assessment. It will tell you a lot more than a product brochure ever will.
This article is for informational purposes only and does not constitute legal, tax, or financial advice.
