In the end, the bark was worse than the bite. Rachel Reeves’ 30 October Budget contained some bad news for the Aim index, but not to the degree that investors had feared. Inheritance tax (IHT) relief on Aim shares held for two years has been halved, not eliminated, meaning that qualifying shares will now be subject to a 20 per cent charge.
The change ensures wealth managers offering portfolios of Aim shares as IHT ‘solutions’ can continue to market them this way to clients. That explains why Craneware (CRW) – a mainstay of many of these portfolios – was the biggest Aim riser last Wednesday, bouncing 20 per cent. Forced selling is now not on the cards.
While wealth manager money will still go into the index, private investors’ continued enthusiasm is less assured. Aim shares’ reliefs still look attractive in a world where other assets are no longer so tax efficient. But this is only one small part of the story: the prospect of good performance should always be the more significant factor.