Abolition of IHT creates potential for significant market disruption but AIM not just a tax dodge

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Abolishing IHT would be bad news for AIM. There is billions of pounds invested in specialist AIM products precisely because of its potential to mitigate IHT bills. Withdrawing that relief would inevitably hit company valuations and has the potential to create serious market disruption.

 

That said AIM is far more than being just a tax dodge. It includes some great companies and billions are invested into the market by fund managers who do not benefit from the inheritance tax relief.

 

In our view it is highly unlikely the government will actually abolish IHT. It’s simply too much of a cash cow. Our estimates suggest the government’s tax-take from IHT could reach £9bn by the end of the decade. That’s not to say cuts and tweaks won’t be made.

 

Of course one of the purposes for IHT relief on AIM is to encourage investment into smaller fast growing companies which in turn creates lots of jobs and economic growth. Radical moves that put that at risk would fly in the face of the government’s wider policy to support smaller company investment so we suspect an alternative carrot to get people to invest in these companies would need to be found.