ISA millionaires exceed 4,000
The UK had over 4,000 ISA millionaires in April 2021, according to the data from HMRC. That’s nearly double the number in 2019 and an almost tenfold increase since 2016. Nearly all are Stocks & Shares ISA investors.
With such a sizeable pot, it’s worth noting that whilst ISAs offer tax-free income and growth during one’s lifetime, they could be subject to up to 40% inheritance tax when bequeathed to anyone other than a spouse or civil partner.
There is an alternative. If your ISA is invested in certain AIM shares, you should be able to pass it on IHT-free, provided you hold the investment at least two years and on death. That’s because some AIM shares qualify for Business Property Relief (BPR), which is an IHT relief.
Please note: AIM ISAs are higher risk and more volatile than conventional ISAs, so are only for experienced investors comfortable with the significant risks. Tax rules can change and benefits depend on circumstances.
Free report: how to make your ISA IHT free
Do you have any Stocks & Shares ISAs? Is your estate, including your main home, worth over £500,000, or £1m for married couples or civil partners? If you answer ‘yes’ to both questions, your ISA could be eventually caught by up to 40% IHT.
How could you avoid that? Request this short free report and discover how you could:
- Prevent your money from disappearing in IHT when you’re gone
- Keep control of your ISA for as long as you live – no gifts, no trusts
- Potentially pass on the whole of your ISA IHT-free
- Keep benefitting from any tax-free growth and income
- Make tax-free withdrawals if you need
How might you invest in an IHT-free ISA?
If you have the time and inclination, you could research and select AIM-quoted shares that qualify for BPR and build a portfolio yourself.
Alternatively, there are reputable and experienced asset managers that offer ready-made portfolios. Our current featured offers are Octopus, RC Brown and Unicorn. They each bring highly regarded specialist expertise – and very different, albeit complementary, investment strategies and could be a consideration for experienced investors who have other investments to fall back on, as AIM shares are high risk.
You could invest your ISA allowance directly in an AIM ISA, or transfer unlimited amounts from previous years’ ISAs – there are ready-made portfolios available and you can apply online (see Featured offers).
Featured AIM IHT ISAs
Our ‘Featured Offers’ are the current offers we consider to have the most investment merit – this is not personal advice and you should form your own view.
Could now be good time to invest in an AIM ISA?
Recently passing a 10-year milestone, AIM ISAs might be said to have come of age as AIM itself has matured – potentially becoming more attractive to IHT-relief-seeking investors.
Once regarded as a poor-quality market, filled with small, early-stage and highly speculative companies, AIM is now home to an increasing number of larger, more mature, often dividend-paying businesses (AIM currently trades at a dividend yield of 2.4%, the highest in the last 10 years).
In 2013, the average market capitalisation of the top 50 stocks on AIM was £588 million, with six companies valued at over £1 billion. By 2023, this has risen to £790 million, with nine companies valued at over £1 billion.
Octopus AIM IHT ISA
This is the largest AIM IHT portfolio, run by one of the most experienced AIM managers. The investment team manages £2 billion across UK quoted company funds, including the Octopus AIM VCTs.
The Octopus AIM IHT portfolio launched in 2005. It seeks to invest in businesses with growth potential, a strong market position and a proven management team. Therefore, companies in the portfolio tend to be larger than one might expect, with an average market value of £617.5 million (June 2023).
RC Brown AIM IHT ISA
RC Brown is a boutique investment management business with £360 million of assets under management, of which £35.5 million is held within the AIM IHT service (June 2023).
The team applies the same investment strategy to this portfolio it has followed since the company was founded, in 1990: it looks to invest in new share issues of companies seeking capital for expansion. This leads the service to have a slight bias towards smaller companies. That said, c.60% of the portfolio is invested in businesses valued at greater than £250 million, with the average market cap for companies in the portfolio at £461 million (June 2023).
Unicorn AIM IHT ISA
The service is managed by specialist UK smaller company investor Unicorn, under the lead of Chris Hutchinson, who is also lead manager of the Unicorn AIM VCT (the UK's largest AIM VCT) as well as the Unicorn Outstanding British Companies Fund.
The team seeks established, profitable, and cash-generative businesses with minimal gearing, favouring companies whose founders or management team have retained a meaningful stake in the business. Investors have the choice of Dividend Focus (average market cap £335.3 million) or Growth Focus (average market cap £421.7 million).
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.