Inherited Tax Amounts Appear Inconsistent, According to AIM Leader
Going for Gold: AIM Hopes for a Tax Break on Its 30th Anniversary
As AIM (Alternative Investment Market) turns 30, it's hopeful for a birthday gift from the Treasury—tax certainty. The market's top brass is knocking on the Treasury's door for clarity, striving to dodge a potential tax rough patch.
Last month, some tea leaves were spilled when a leaked memo revealed Deputy Prime Minister Angela Rayner suggested Chancellor Rachel Reeves slap a string of taxes on savers. Proposing to scupper the inheritance tax exemption for AIM shares, this move could inject anywhere between £100 million to £1 billion annually into government coffers.
"I'm just not buying it," said Marcus Stuttard, head honcho of AIM, speaking to City AM. He argued that business relief enjoys a colossal positive impact on the market, outweighing the cost of this relief by a significant margin.
Back in the Autumn Budget, business relief on AIM shares took a beating, getting slashed in half. But now, Prime Minister Sir Keir Starmer's second-in-command is eyeing the remaining 50% for the chopping block.
Reeves to Raise the Roof on Taxes
The UK's spending spree under Chancellor Rachel Reeves is triggering tax anxieties, as a £190 billion blowout could plunge the government into a fiscal abyss. KPMG's analysis reveals that if growth projections fail, Reeves could be left with a £20 billion deficit in the coming budget.
With an "iron-fisted" commitment to financing day-to-day spending through tax receipts, Reeves is bracing for a hefty tax hike.
The complete abolition of business relief on AIM shares might be just the beginning. London's junior stock market is grappling with dwindling figures, facing a potential 20% contraction as a result of a flurry of delistings.
The number of companies listed on AIM dropped to its lowest since 2001, with 71 firms making a dash for the exit within the past year. According to UHY Hacker Young, this trend is eating away at the market's vitality.
Stuttard believes the Treasury would come out on the short end if it scrapped the remainder of the business relief for AIM shares. He reasoned that the potential losses to the Treasury pale in comparison to the valuable impact AIM companies make on the UK economy and job market.
"One can only hope the stark discrepancies in these figures catch the government's attention," he remarked. He highlighted research by Grant Thornton, commissioned by the London Stock Exchange Group (LSEG) in 2021, which revealed UK incorporated companies on AIM make a whopping £35.7 billion contribution to UK GDP and support over 410,000 jobs across the supply chain.
From April 2026, inherited AIM shares will only attract 50% inheritance tax relief, with no £1 million allowance. Other business assets will have a £1 million allowance with a 50% relief on amounts exceeding that threshold. This narrows the previously more favorable tax treatment of AIM shares compared to other business assets[3][4].
Investors may reconsider their AIM share holdings due to the reduced inheritance tax advantage, making these shares less attractive for estate planning and wealth transfer. However, AIM's pivotal role in the economy, coupled with quality AIM businesses generating cash, may still entice investors, regardless of changes in tax relief[4]. Shareholders could potentially ponder restructuring or other tactics to minimize increased inheritance tax liabilities[3].
- In light of the potential tax changes, AIM's top brass is urging the Treasury to reconsider the proposed adjustments to business relief on AIM shares, emphasizing the significant financial impact these companies have on the UK economy and job market.
- As Chancellor Rachel Reeves explores the possibility of raising taxes to fund the government's spending, the UK's finance and business community, including investors in AIM, are closely monitoring the potential impact of these tax policies on markets and their investments.
