Allowing AIM stocks in ISAs – Ros Altmann

    Ros is a leading authority on both private and state pensions,annuities and
    retirement policy. Numerous major awards have recognised her work to
    demystify finance and make pensions work better for people.

  • Ros Altmann

    Ros Altmann

    Allowing AIM stocks in ISAs

    Allowing AIM stocks in ISAs

    Another small step to help SMEs

    Good news for ISA investors too

    Triple tax benefits for investors – returns free of income, capital gains and inheritance taxes

    by Dr. Ros Altmann

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    The Treasury has today announced its plans to improve the investment opportunities for ISA investors. It plans to allow ISAs to invest in small and medium sized companies (SMEs) that are listed on the Alternative Investment Markets (AIM).

    This will mean a triple tax benefit for investors, since their ISA investments will be free of income tax, capital gains tax and also free of Inheritance Tax. There are several tax benefits of using ISAs to invest in small firms. ISAs are free of income tax on any dividends, no capital gains tax and if the companies are quoted on AIM, then the money can be passed on free of IHT on death.

    Until now, most of these AIM stocks could be held in pension funds but not ISAs, which makes little sense from the investor viewpoint and also depletes the supply of available investment funding for these firms.

    Currently, ISA restrictions mean ISA investors are not permitted to invest in these small company shares, although pension funds have more freedom to do so. With the growing amounts of money being saved in tax-free ISA wrappers, it makes sense for the Government to widen the range of investment opportunities for such savers.

    The latest Bank of England figures also show that bank lending to SMEs has been falling (despite the aggressive easing of monetary policy that is supposedly designed to ensure more bank credit flowing to support the economy).

    Anything we can do to ensure more money for small UK businesses must be a positive step for the economy. The sums invested in ISAs are close to £400billion, so this is a significant source of potential funds. Figures show that 190bn is invested in stocks and shares ISAs, while £200bn is in cash ISAs. These Cash ISAs are earning paltry returns and some savers may be willing to divert a portion of these funds to direct small company investing in future. This could be helpful to growth, especially when banks are not lending enough.


    Dr. Ros Altmann

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