AIM-pocalypse would hurt more than just those seeking IHT relief

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.

AIM companies are young and high risk, but also innovative and fast growing. These businesses can be attractive investments in their own right – with around 17% of the AIM All Share owned by UK investment funds that do not qualify for IHT relief. Unsurprisingly, they are particularly popular with smaller company funds.

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.

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.

Ten Funds with the most money invested in AIM (June 2024)*

	Amount Invested in AIM	Percentage Exposure
Liontrust Special Situations	£           782,518,217.0000	22.2%
Liontrust UK Smaller Companies	£           721,117,732.0000	68.6%
Marlborough UK Micro Cap Growth	£           459,385,592.0000	71.1%
Chelverton UK Equity Growth	£           328,413,457.0000	49.2%
Marlborough Special Situations	£           300,935,469.0000	44.8%
abrdn UK Smaller Companies	£           293,001,662.0000	29.7%
Gresham House UK Multi Cap Income	£           216,775,486.0000	27.7%
Amati UK Listed Smaller Companies	£           161,328,236.0000	41.3%
Schroder UK Smaller Companies	£           144,189,870.0000	39.5%
Invesco UK Smaller Companies	£           139,990,163.0000	28.9%

*Source: Morningstar/Wealth Club Research, as at 30 June 2024