Why AIM investing can still be a useful financial planning tool

Before the Autumn Budget there were rumours that rules, which allow some qualifying Alternative Investment Market (AIM) shares to be inherited without being taxed (if held for more than two years), would be scrapped. 

The good news is that, despite expectations, qualifying AIM shares still get inheritance tax relief – just not as much as it did before the Autumn Budget. Instead of abolishing it altogether, Chancellor Rachel Reeves announced that 50% relief will be applied to qualifying AIM shares setting the effective tax rate at 20%.

The change is part of a host of inheritance tax measures that were introduced in the Autumn Budget and is meant to help raise as much as £2 billion for the treasury. The new rules will come into effect in April 2026. 

The AIM market is a sub-market of the London Stock Exchange (LSE) and it’s designed for smaller, growing companies. It gives these companies a platform to raise capital and grow while at the same time offering investors the opportunity to invest in emerging businesses with a high growth potential. 

It’s lighter on regulation than full stock market exchanges, like the LSE. As AIM is historically the home of nascent and emerging companies (instead of more established companies) this introduces a high level of risk for investors which can mean greater losses or even loss of all invested money. The risks include the potential for default, poor performance and bankruptcy. 

Another characteristic of AIM listed companies is that the businesses listed here often have a shorter track record. Therefore, the business models may not yet be as proven as those who have been listed on the LSE for several years for example. However, this is not always the case as there are some mature and recognisable companies on AIM such as Fevertree, Young & Co’s. Brewery and Jet2. 

If you want to consider taking advantage of the benefits of investing in AIM, which includes IHT relief and the potential for higher growth in your portfolio, it’s important to seek advice before doing so. There are a diverse range of companies listed on AIM and not every company on this exchange qualifies for IHT relief, e.g. financial services companies, real estate investment trusts and investment companies. Nor are these investments suitable for all types of investors.

While it’s disappointing that investors in this market can no longer benefit from a 100% IHT exemption, our view remains that AIM investing can still offer valuable IHT saving. 

It’s important to seek formal advice on the ongoing appropriateness of investing in AIM as part of your long-term estate planning. Such investments should only be for experienced investors and those who can tolerate higher risks and withstand greater losses. Tax rates and reliefs depend on individual circumstances and may change. The recommended holding period is more than five years.

At Evelyn Partners, we see the value of a financial planner working collaboratively with an investment manager to help achieve your financial goals. We call this combined wealth management.

A financial planner will work to understand your financial aims and goals, which could be reducing your IHT liability. An investment manager, understanding these objectives along with your attitude towards investment risk, will design your individual investment portfolio, which may include an AIM portfolio for IHT planning.

This collaborative, integrated approach to wealth management can lead to improved financial outcomes in the long term.

If you have any questions about the Autumn Budget, combined wealth management, concerns about the IHT changes or want to know more about the advantages and disadvantages of investing in AIM please contact your usual Evelyn Partners adviser. You can book a complimentary consultation or call 0207 189 2400.