Inheritance Tax Planning: Are AIM investments still worth it?

By Tegan Gladman, Independent Financial Planner. DipPFS.

In the Autumn budget 2024, the UK government proposed changes to Inheritance Tax (IHT) relief on Alternative Investment Market (AIM) investments. These are set to take effect from April 2026 and have raised concerns among investors and financial planners. The question is, is it still a worthwhile investment strategy?

Proposed Changes to IHT Relief on AIM Investments

Currently, shares listed on the AIM qualify for 100% Business Property Relief (BPR) from IHT, provided they are held for at least two years. This means that investors can pass on the full value of their AIM investments to their beneficiaries without incurring any inheritance tax on the value. However, the autumn budget announced that starting from April 2026, the BPR on AIM shares will be reduced to 50%.

However, these investments may still offer compelling benefits for estate planning.

Why AIM Investments Remain Attractive

Despite the reduction in IHT relief, AIM investments continue to present several advantages:

• Lower Effective IHT Rate: Even with the 50% BPR, the effective IHT rate on AIM shares remains at 20%, significantly lower than the standard 40% IHT rate.
• Remains accessible: AIM investments remain fully accessible to the owner with no restrictions, which means regular and ad hoc withdrawals are available. Lack of access can be an issue with many other IHT planning vehicles.
• Growth Potential: AIM-listed companies often exhibit high growth potential. Investors in these companies can benefit from capital appreciation, which can offset the reduced IHT relief.
• Diversification: AIM investments offer exposure to a diverse range of sectors, allowing investors to diversify their portfolios and mitigate risks.
• Tax-Efficient Investment Vehicles: AIM investments can be held within ISAs providing additional tax advantages.

Inheritance Tax Service Investments

Following the changes, you will still be able to get up to 100% BPR relief on Inheritance Tax Service Investments (ITS) up to £1million. Anything above this will benefit from 50% BPR relief.

Conclusion

Whilst the proposed reduction in IHT relief on AIM investments may alter estate planning strategies going forward, these investments continue to offer significant benefits. Their growth potential, lower effective IHT rate, and role in portfolio diversification make them a valuable consideration for investors seeking to manage IHT liabilities.

Additionally, Inheritance Tax Service Investments provide a structured approach to investing in qualifying companies, potentially offering up to 100% IHT relief.

Engaging in proactive planning and seeking professional advice can help navigate these changes effectively.

How Anstee & Co. can help you with your Inheritance Tax Planning.

We are a firm of Independent Financial Advisers (IFAs), meaning that the financial advice we provide is unbiased. Why not arrange a meeting with us to explore how we can assist you? The initial meeting is at our expense and comes with no obligation. We can schedule meetings at times and locations that are convenient for you.

Our Head Office is in Kettering, Northamptonshire.

In addition, our financial advisers have meeting rooms in:

• Market Harborough, Leicestershire
• Bedford, Bedfordshire
• Northampton, Wellingborough, and Thrapston, Northamptonshire

Our expertise encompasses all aspects of financial planning, including pensions, investments, and mortgages.

We would love to hear your thoughts or comments on this article, “Inheritance Tax Planning: Are AIM investments still worth it?”

Lastly, please note that the information provided in this article is for informational purposes only and does not constitute financial advice. No action should be taken based solely on this information. Anstee & Co. is authorised and regulated by the Financial Conduct Authority (FCA).