AIM shares for Inheritance Tax planning
As has been widely publicised, we are expecting the Government to significantly restrict Business Property Relief (BPR) from 6th April 2026. At present, the final legislation is not available, but the likely impact will be that 100% BPR will be restricted to the first £1 million qualifying assets, with the remainder attracting BPR at 50% (i.e. the tax due will be 20% rather than 40%).
AIM shares and Inheritance Tax
AIM shares have for a long time been a fixture in the arsenal of Inheritance Tax friendly products offered by financial planners, as they have historically attracted 100% BPR, making them Inheritance Tax free.
Under the new legislation, AIM shares will only qualify for 50% relief, whether it falls within the first £1 million or not. We assume that this is because the Government has realised something that investors have been privy to for years – investing in AIM shares is a lot less effort that running your own trading business to qualify for the relief!
As a result of that, the once very Inheritance Tax efficient investment is perhaps now just moderately Inheritance Tax efficient, and will potentially still qualify for Inheritance Tax at half the usual rate (when held long enough), which could still provide very significant savings.
The main downside with any tax advantaged investment is that they are tax advantaged for a reason – usually because they are riskier, or they provide smaller returns. It will depend very much on the individual investment, and before acquiring AIM shares, you should seek financial advice.
What is the future for AIM shares under the new regime?
Because of the reduction in reliefs across the board for BPR, APR and especially pensions, it seems likely that AIM shares will remain a useful part of a balanced Inheritance Tax efficient plan for two important reasons:
1.
They only needing to be held for two years to provide a 50% reduction in Inheritance Tax. This means that the relief is available much more quickly than say, on an outright gift, which needs to have been made at least three years (and often seven years) to start to benefit from any reduction in Inheritance Tax.
2.
There is no need to give away the underlying asset, which can be retained should it ever be needed, providing a tax efficient safety net.
AIM shares could therefore still provide an alternative way to plan to reduce Inheritance Tax when gifting is not possible or practical.
How Gravita can help
Don’t let the new BPR restrictions cost your estate thousands in unnecessary tax. Our specialists can help you navigate the changing landscape and optimize your Inheritance Tax planning strategy. Schedule a consultation with Gravita Tax Consultancy to protect more of your wealth for your beneficiaries.
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