Ending inheritance tax relief on Aim shares could hinder growth

Experts have raised concerns that eliminating the inheritance tax relief on shares in high-growth businesses could negatively impact the UK economy. This tax relief, which has been in place since 1996, allows shares in small and medium-sized companies listed on the AIM market to be exempt from inheritance tax if held for over two years before an individual's death. The Institute for Fiscal Studies estimates that abolishing this relief could generate approximately £1.1 billion for the Treasury. The current scheme is intended to encourage investment in smaller British enterprises, which often face challenges in securing funding during their initial stages. By providing a tax incentive, the government aims to stimulate growth and innovation within this sector. However, experts warn that removing this exemption could deter potential listings on the AIM market, making it more difficult for start-ups to attract necessary capital. The potential financial gain for the Treasury must be weighed against the long-term implications for economic growth and productivity. If start-ups find it more expensive to raise funds, this could lead to a slowdown in innovation and hinder the overall growth of the economy. The government’s mission to foster a thriving business environment may be compromised if such tax reliefs are abolished. In conclusion, while the proposed changes could provide immediate financial benefits to the government, the broader consequences for the economy and the start-up ecosystem could be detrimental, potentially stifling growth and innovation in the long run.