In a significant fiscal move, Chancellor Rachel Reeves announced new tax measures affecting AIM shares.
- A 50% relief on inheritance tax is introduced for AIM shares and similar markets.
- The effective inheritance tax rate is adjusted to 20% under Reeves’ balanced strategy.
- Inheritance tax bands are frozen until 2030, maintaining previous thresholds.
- Only a small percentage of estates will be subject to inheritance tax this year.
The Chancellor’s announcement introduces a pivotal change to the inheritance tax system, particularly influencing shares held on the Alternative Investment Market (AIM) and similar markets. The 50% relief in “all circumstances on inheritance tax” for these shares effectively brings the tax down to 20%. This reflects what Rachel Reeves referred to as her “balanced approach” during her first Budget since Labour’s electoral victory in July.
Reeves’ reforms are part of a broader strategy aimed at modifying the inheritance tax (IHT) framework. She emphasised that only about 6% of estates will be liable for inheritance tax this year. This move is designed to facilitate smoother transitions for those holding significant investments in AIM and comparable markets, thus providing a substantial incentive for investors.
Another notable decision from the Chancellor is the extension of the freeze on inheritance tax bands. These bands will remain unchanged for an additional two years, set to continue until 2030. This decision means that the tax-free threshold for an estate will stay at £325,000. Notably, if a residence is passed directly to descendants, this threshold can increase to £500,000, offering further relief for family estates.
Rachel Reeves’ budgetary decisions mark a continuation of policies from her predecessors, focusing on sustaining existing financial frameworks while introducing targeted adjustments. The strategic freezing of tax bands ensures stability and predictability for taxpayers, maintaining current tax exemptions and limits.
Chancellor Reeves’ strategic measures aim to balance fiscal responsibility with reliefs for investors on AIM and similar markets.
