The head of London’s junior stock market, Aim, has made a striking appeal to the UK Government to reverse its recent decision to cut inheritance tax relief on Aim-listed shares, warning that the change threatens to accelerate an already significant exodus of companies from the market. Marcus Stuttard, who oversees Aim and UK primary markets at the London Stock Exchange, highlighted the scale of the problem as more than 60 companies, collectively valued at over £12 billion, are set to leave the market this year alone. The relief on inheritance tax is being slashed from 100% to 50% from April next year, a move that Mr Stuttard described as a “major blow” to Aim’s attractiveness for investors.

Aim, launched in 1995 as a platform for small and medium-sized enterprises to access capital, has seen a steep decline in its listed companies—from around 1,700 in 2007 to fewer than 700 today. This decline is attributed to a range of factors including rising listing costs, more onerous regulations, and the recent tax changes. Mr Stuttard stressed that financial incentives are crucial to halting the outflow of companies and encouraged the Government to provide “certainty” and support for investors attracted to Aim by tax relief. He also emphasised the importance of bolstering domestic investment, urging that UK pension funds be encouraged to back the country’s small business sector, which international investors already understand well.

The context of the inheritance tax relief cut fits into a wider backdrop of the UK Government tightening tax policies on wealth and business assets. Since April 2025, non-domiciled residents have faced inheritance tax on their global assets, ending the longstanding non-dom regime that had exempted many wealthy individuals from such taxation. This change is reportedly prompting a wave of high-net-worth individuals to leave the UK, with prominent billionaires among them, such as Lakshmi Mittal and Nassef Sawiris, either already departed or planning to depart. The exodus risks harming the economy as well as undermining expected tax revenue—projections suggest that if a significant portion of these wealthy residents leave, the expected gain to the Treasury could be wiped out altogether.

The government’s broader package of tax increases on wealth includes measures targeting private equity, offshore trusts, and high-value assets like private jets and second homes, with the intention of raising billions of pounds. However, the knock-on effect on business owners and investment markets is drawing criticism. The damage is compounded by the removal of tax incentives specifically tailored to markets such as Aim, which have traditionally helped smaller companies access growth capital without succumbing to early buyouts or overseas takeovers.

Analysts and investors warn that the halving of inheritance tax relief on Aim-listed shares could lead to a sharp decline in the market’s value. Stockbroker Peel Hunt has suggested a possible 20%-30% drop in the Aim index as investors who have relied on 100% relief may be forced to sell their holdings. Given Aim’s relatively limited liquidity, this “rush to the exits” could precipitate a broader market downturn, with other investors following suit. Despite Aim’s reputation for some well-publicized scandals, its role in nurturing successful companies like Fevertree and Gamma Communications—which have grown significantly through the market—should not be overlooked. The market’s value at about £75 billion includes around £11 billion from investors motivated by inheritance tax relief, signalling how dependent the market remains on such financial incentives.

To address these challenges, Mr Stuttard revealed that discussions are underway to explore how Aim can adapt and evolve. The Group is preparing a discussion paper to solicit feedback from companies on what changes might make the market more appealing, considering that “nothing is off the table.” There is a clear recognition that Aim’s purpose—to provide a financing pathway from startup to global business—remains vital for the UK economy and capital markets, particularly given the current trend of companies leaving the market for bigger or overseas stock exchanges.

Industry voices have also called for the Government to consider reinstating policies that can revive investor appetite. These include suggestions to mandate pension funds to increase their holdings in UK equities and reintroduce tax-free savings schemes focused on British stocks. The Treasury’s current course, while politically popular and designed to fill a fiscal shortfall, faces a balancing act between raising revenue and maintaining the UK’s competitiveness as a global financial centre. The government may need to revisit some of its inheritance tax policies and other wealth taxation measures in the coming months to stem the ongoing outflows and ensure the continued vitality of markets like Aim.

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Source: Noah Wire Services