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Unquoted Company

Also known as: Private Company, Unlisted Company

Definition

An unquoted company is a company whose shares are not listed on a recognised stock exchange, including most private limited companies and businesses whose shares trade on markets like AIM.

Understanding whether your company is quoted or unquoted is crucial for estate planning because it determines inheritance tax relief availability and how shares can be transferred through your will.

What Does Unquoted Company Mean?

Under the Companies Act 2006, an unquoted company is defined as any company that is not a "quoted company"—meaning its shares are not included on the official list of a recognised stock exchange. This includes most private limited companies, family businesses, and startups. The key distinction isn't whether shares can be bought and sold (they can be transferred privately), but whether they appear on an official exchange listing under UK financial regulations.

Importantly, shares trading on the Alternative Investment Market (AIM) are classified as unquoted for inheritance tax purposes, even though they trade on a market. HMRC defines "quoted" as listed on a recognised stock exchange, and AIM is not considered a recognised stock exchange under this definition. This classification currently allows AIM shares to qualify for valuable tax relief, though significant changes are coming in April 2026.

For inheritance tax purposes, unquoted company shares can qualify for 100% Business Property Relief after two years of ownership, potentially eliminating inheritance tax entirely. Sarah owns 60% of a private manufacturing company worth £500,000. After owning the shares for over two years, her shares could qualify for 100% Business Property Relief, potentially saving her estate £200,000 in inheritance tax. However, the company must be a trading company—not primarily an investment, property letting, or securities business—to qualify for this relief.

The tax treatment differs significantly from quoted company shares, which only receive 50% relief for controlling shareholdings. From 6 April 2026, AIM shares will also drop to 50% relief, fundamentally changing the inheritance tax planning landscape for AIM investors. David owns £280,000 of AIM-listed shares held for three years. Currently these qualify for 100% relief if held for two-plus years. From April 2026, only 50% relief will apply, meaning his estate could face £56,000 inheritance tax on these shares—20% of the total value.

Unlike quoted shares that have daily published market prices, unquoted shares require professional valuation for probate and inheritance tax purposes. Valuers consider factors including the company's assets, earnings, growth prospects, and whether the shareholding provides control over the company. Minority shareholdings typically receive a valuation discount compared to controlling stakes. HMRC's Shares and Assets Valuation division reviews valuations and may challenge them if they appear too low.

The company's Articles of Association often contain transfer restrictions that can override your will instructions. These may include pre-emption rights requiring shares to be offered to existing shareholders first, board approval requirements, or restrictions on transfers to non-family members. Emma owns 25% of a private software company worth £180,000 and wants to leave her shares to her daughter Charlotte. However, the company's Articles include pre-emption rights. When Emma dies, her executors must first offer the shares to the other shareholders at fair value. Only if they all decline can Charlotte inherit the shares—otherwise she receives cash instead.

Common Questions

"Are AIM shares treated as quoted or unquoted for inheritance tax purposes?" AIM (Alternative Investment Market) shares are treated as unquoted for inheritance tax purposes, even though they trade on a market. This is because HMRC defines 'quoted' as shares listed on a recognised stock exchange, and AIM is not classified as such. This currently allows AIM shares to qualify for 100% Business Property Relief, though this will reduce to 50% from April 2026.

"How are shares in an unquoted company valued when someone dies?" Shares in an unquoted company must be valued at their open market value as at the date of death for inheritance tax purposes. Because there's no public market price, professional valuation is typically required, considering factors like the company's assets, earnings, growth prospects, and whether the shareholding gives control. Minority shareholdings may receive a discount.

"Can I leave my unquoted company shares to anyone in my will?" Not necessarily. The company's Articles of Association may contain restrictions on share transfers, including pre-emption rights requiring shares to be offered to existing shareholders first. Even if your will names a beneficiary, the company's Articles take legal precedence. Check your Articles and any shareholders' agreement before making decisions in your will.

Common Misconceptions

Myth: If a company's shares can be bought and sold, it's a quoted company

Reality: A company is only "quoted" if its shares are listed on the official list of a recognised stock exchange. Many unquoted companies have shares that change hands through private sales, and AIM-traded shares are still classified as unquoted for inheritance tax purposes. The distinction is about official exchange listing, not whether shares are tradeable.

Myth: My will determines who inherits my company shares, regardless of any other documents

Reality: The company's Articles of Association and any shareholders' agreement take legal precedence over your will when it comes to who can own shares. These documents may contain pre-emption rights requiring shares to be offered to existing shareholders first, board approval requirements, or outright restrictions on transfers to non-family members or non-shareholders.

  • Business Property Relief: Unquoted company shares can qualify for 100% Business Property Relief, while quoted company shares only receive 50% relief for controlling shareholdings—this is the primary tax advantage of owning unquoted shares.
  • Company Shares: Unquoted company shares are a specific type distinguished by not being listed on a recognised stock exchange, with additional considerations for valuation and transfer restrictions.
  • Business Succession Planning: Understanding whether your company is quoted or unquoted is essential because it affects inheritance tax relief availability, valuation methodology, and transfer restrictions.
  • Share Valuation: Unquoted shares require professional valuation because there's no public market price, unlike quoted shares that have daily published prices.
  • Articles of Association: These governing documents contain the rules about how unquoted company shares can be transferred and take precedence over wills.

Need Help with Your Will?

Understanding whether your company is quoted or unquoted is essential for inheritance tax planning. Including business assets properly in your will ensures your company can pass to the next generation efficiently.

Create your will with confidence using WUHLD's guided platform. For just £99.99, you'll get your complete, legally binding will plus three expert guides. Preview your will free before paying anything—no credit card required.

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.