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None of us like the idea that the wealth we’ve accumulated will end up in the hands of the tax man, rather than helping the next generation. One way to reduce this potential Inheritance Tax (IHT) liability is to invest in shares traded on the Alternative Investment Market (AIM). Most AIM companies qualify for what’s called Business Relief (BR), and under current UK tax rules any shares in these companies can be passed on free of IHT once you have held them for two years.
But investing in AIM shares isn’t just about saving IHT. Whilst AIM companies are higher risk than the average equity portfolio, the market has become a lot more mature, having grown in value from £37 billion in 2009 to £100 billion in 2019, so offers real potential for capital growth.
There are many ways to reduce IHT, such as gifting and trusts, and even other BR options, so if reducing your Inheritance Tax bill is something you’re looking to do, it’s worth speaking to a Financial Planner to assess your options.
* Office of Tax Simplification (OTS) / HMRC, 2019
Navigating your way around the AIM market is not easy. Not all AIM companies qualify for Business Relief, and there is greater volatility in the market. Our AIM portfolio runs on a discretionary managed basis by our specialist in-house AIM Team so you don’t have to deal with what can be a complicated Investment Management process in an already complicated market.
We have a team of Investment Managers who are exclusively dedicated to providing one of the most diversified and well-managed AIM portfolios in the UK, some of whom have been managing tax-efficient investments for over 20 years. They’ll use their expert knowledge of the market, to selectively invest your money in diversified AIM companies, paying particular attention to the ability of the underlying businesses to withstand turbulence in their markets.
We strive to deliver exceptional performance for our clients. On average, AIM portfolios have generated excellent returns over a number of years after management costs and fees. You can view our quarterly performance reports in the Useful Downloads section below. In addition, we not only monitor stocks on a daily basis, we also keep in regular contact with the companies we invest in on your behalf.
Life has a habit of being unpredictable and it’s possible you might need to access some or all of your money to pay for unforeseen costs or a change in circumstances. A great advantage of your AIM portfolio is that your money is not locked away. You retain control of your assets at all times, you can easily make withdrawals or conversely make further contributions if you wish. The amount you withdraw from your AIM portfolio will of course no longer be IHT free, but what you keep invested should be.
If you’ve been investing your money wisely, chances are you have built up a significant ISA pot. Depending on your overall wealth, those ISA investments whilst tax free now, could potentially be exposed to 40% IHT on your death. The good news is that you can usually transfer them into your AIM portfolio. The new holdings in AIM companies should then qualify for Business Relief, as well as being exempt from income tax on dividends and Capital Gains Tax on profitable disposals.
There are many options to reduce your IHT liability, but in most instances you’ll also have to wait as long as seven years for your estate to fall outside the remit of IHT. In contrast our AIM portfolio is not only pretty straightforward to set up, it’s also a tax-efficient, flexible and cost-effective alternative that, most importantly, will see IHT relief kick-in after just two years.
During our time we have seen significant volatility in the financial markets and have always felt reassured and in no doubt that our money is being managed with due care and diligence.
5 min read
Investec Wealth & Investment (UK) is a trading name of Investec Wealth & Investment Limited which is a subsidiary of Rathbones Group Plc. Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN.