The government removing inheritance tax (IHT) relief on AIM would amount to an ‘AIM-pocalypse,’ with the impact spreading far beyond those inheriting assets, according to Wealth Club.
The London Stock Exchange earlier warned that removing IHT relief from AIM is likely to result in significant market volatility.
This could hit large swathes of UK investors, not just those investing in AIM for IHT relief, research by Wealth Club found.
As at the end of June 2024 there was £8.3b invested in AIM by UK funds, accounting for around 16.5% of the AIM All-Share Index.
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Of the 321 funds reviewed, 209 held at least one AIM quoted stock, 41 had more than 25% of the fund in AIM stocks and twelve funds had more than 50% invested.
Nicholas Hyett, investment manager at Wealth Club, said: “There is a perception that pulling inheritance tax relief from AIM might be painful, but would only hit a handful of mega-wealthy investors looking to minimize their IHT bill. That view fails to appreciate the important role AIM plays in the wider UK investing landscape.
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“In the event that pulling IHT relief from AIM caused significant volailtity and saw declines in valuation, these funds, including popular funds from managers like Liontrust and Marlborough, would not escape unscathed.
“A tax relief driven AIM-pocalypse would have far reaching consequences,” he continued. “Reputational scarring for the UK smaller companies sector, together with permanently lower valuations on AIM, could make it more expensive for UK small companies to raise capital from public markets.
“That not only makes UK companies less competitive, but increases the chances that our most ambitious companies will look abroad for funding. For a government that has set out to deliver growth a ‘growth agenda,’ that is not a good look.”
