Business Matters: AIM will reduce inheritance tax | Blogs

Simon Crawford, associate director of financial planning at Investec Wealth, sees the alternative investment market as a tool for estate tax planning.

As former Labor Chancellor Roy Jenkins said in 1986, “inheritance tax is a voluntary levy paid by those who distrust their heirs more than they love the taxman”.

What he meant was that it is legal and feasible to reduce your Inheritance Tax (IHT) bill through a wide range of means, leaving more of your estate to your loved ones. Here I will discuss an example.

Inheritance tax basics

Currently each individual has a zero rate band of £325,000 and a residential zero rate band up to £175,000 (which applies when passing on your principal residence to a descendant). Combined, these bands allow you to pass on up to the first £500,000 of your estate to your beneficiaries without IHT. This amount is doubled to £1 million per married couple or registered civil partnership.

Assets above this threshold will generally be subject to a 40% inheritance tax charge on death.

Investments without IHT

If the size of your estate is larger than the zero-rate bracket, one option to reduce inheritance tax is to invest in qualification Alternative Investment Market Companies (“AIM”). These companies are usually smaller companies with higher growth potential.

Benefits of AIM

Investing in AIM companies is a simple and clean way to retain or obtain relief from inheritance tax. There are no expensive structures and few complexities involved. Investments can be held in personal names, individual savings accounts (ISAs) or joint accounts, which means access to money, if needed, is simple.

Over the past 10 years, the AIM market has generated an average annual return of 7.5%1, while investing in a specific AIM plan such as the Investec AIM IHT Portfolio has achieved average net returns of 12.9% per year. Remember that past performance is not necessarily indicative of the future and should not be relied upon.

Learn more

If you want to grow your capital and protect part of your estate from inheritance tax, please contact [email protected] I would be happy to explain your options in more detail.

The value of your investments can go down as well as up and you may not get back the full amount

invested. Your capital is in danger.

The information in this publication does not constitute a personal recommendation and the investment or investment services referred to may not be suitable for all investors; therefore, we strongly recommend that you consult your professional adviser before taking any action.

Tax treatment depends on each customer’s individual situation and may be subject to change in the future. All statements regarding tax treatment are based on our understanding of current tax law and HMRC practice and may be subject to change.


1Factset 2022

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