Ahead of the Budget, there was much speculation that Business Relief may be removed from shares of the secondary market, AIM. This had caused significant weakness in the market since the Election in July, unlike most other markets.
As an investment manager who specialises in buying companies on AIM, I am pleased to say that the relief has been maintained until April 2026 and from then will be limited to 50%. This will effectively result in an Inheritance Tax (IHT) rate of 20%, rather than the full 40% - still a significant and worthwhile saving. There is no upper limit to the size of investment that can receive the relief.
This change has so far been well received by the AIM market which is up some 4% since the announcement during the Chancellor’s inaugural budget. Given the low relative valuation of AIM shares compared to other asset classes, I would expect further progress in the coming weeks and months now that the uncertainty has been removed.
The economic and stock market backgrounds generally favour the smaller company sector, especially on AIM, after a long period of under-performance. We are seeing solid growth from the majority of our investee companies and, now that interest rates have started to fall, investor attention should return to the attractions of smaller company equity investment.
Another change in the Budget that may offer a tailwind to AIM, is the removal of IHT relief from pensions in the hands of the beneficiary. This may encourage investors to seek other ways of mitigating IHT, with AIM investment remaining one of the key routes to achieving this, particularly as the IHT thresholds have been frozen for another two year (until 2030), meaning more people will have to pay.
Talk to your professional adviser or one of our Wealth Planners to determine whether the Inheritance Tax Portfolio Service, and the risks that go with it, are suitable for you