Navigating the Complexities of Inheritance Tax

Inheritance tax planning is a critical aspect of wealth management, especially for those looking to pass on significant assets to the next generation. One often overlooked but highly effective tool for inheritance tax planning is investing in Alternative Investment Market (AIM) through ISAs and General Investment Accounts (GIAs). 

What is AIM?

The Alternative Investment Market (AIM) is a sub-market of the London Stock Exchange that allows smaller companies to float shares. AIM investments are generally considered higher risk compared to more established markets but offer the potential for higher returns.

Types of Investments in AIM

AIM comprises a diverse range of companies, including technology startups, retailers, and energy companies. The market offers both equity and debt instruments, although it's primarily known for its equity offerings.

AIM ISAs and AIM GIAs

AIM ISAs: An AIM ISA allows you to hold AIM-listed shares within a tax-efficient wrapper. Any gains from these investments are free from Capital Gains Tax, and dividends received are also tax-free.

AIM GIAs: An AIM GIA is a General Investment Account that holds AIM-listed shares. Unlike AIM ISAs, AIM GIAs do not offer the same level of tax efficiency on gains and dividends but can still be beneficial for inheritance tax planning.

Inheritance Tax Benefits

Business Property Relief (BPR): AIM shares are often eligible for Business Property Relief, which means they can be passed on free from inheritance tax if held for at least two years.

Accessibility of Capital: One of the advantages of AIM investments is that the capital is not locked in. You can sell your holdings if you need access to your funds, although this would impact the inheritance tax benefits.

The Role of an Independent Financial Adviser (IFA)

Risk Assessment: AIM investments are higher risk. An IFA can assess whether they are suitable for your financial profile.

Tax Planning: An IFA can integrate AIM ISAs and AIM GIAs into your broader tax and inheritance planning strategy.

Portfolio Diversification: An IFA can help diversify your AIM investments to mitigate some of the associated risks.

Ongoing Monitoring: AIM markets are volatile. An IFA can provide ongoing portfolio reviews to ensure alignment with your financial goals.

Inheritance Tax Planning using your Investments

AIM ISAs and AIM GIAs offer a unique opportunity for inheritance tax planning, thanks to their eligibility for Business Property Relief. While they come with higher risks and volatility, the potential for significant tax benefits makes them an option worth considering for those looking to mitigate inheritance tax liabilities.

If you're interested in exploring how AIM ISAs and AIM GIAs can fit into your inheritance tax planning strategy, we're here to help. Contact us today to discuss your options and how we can assist you in achieving your financial goals.