Stamp Duty scrapped on AIM shares
From today, it's cheaper to invest in the shares of small- and medium-sized companies.
Shares in companies listed on the smaller Alternative Investment Market (better known by its acronym AIM) are now exempt from Stamp Duty.
The Government announced the move in the 2013 Budget in a bid to increase investment in what is often referred to as the “lifeblood of our economy”, small- and medium-sized firms.
Free stocks & shares ISAs guides
A brief history of AIM
AIM was launched in 1995 with the objective of helping smaller companies raise the money they need to expand through share issues.
There have been a few high-profile AIM success stories, most notably online fashion retailer Asos.com and Majestic Wine.
At its peak in 2007 there were 1,694 companies listed on the index: 1,347 from the UK and 347 from overseas.
AIM shares looking more attractive
The change in the rules on Stamp Duty on AIM shares means investors will now avoid a 0.5% tax charge when they buy shares in companies listed on the index.
Figures from investment platform TD Direct Investing show that on the average investment of £2,000 this halves the purchasing cost, leaving only the commission cost.
And that’s not the only change the Government has made in a bid to make AIM shares more attractive.
Since last August, you can hold AIM shares in a stocks & shares ISA, thereby shielding them from Capital Gains Tax too.
Another benefit is most AIM shares are already potentially exempt from Inheritance Tax. If a shareholder dies and has held his AIM shares for at least two years, the estate doesn’t have to pay any Inheritance Tax on those shares. However, this Inheritance Tax exemption doesn’t apply to AIM companies which are involved in property development or investment.
Already proving popular
The move to allow AIM shares to be held in stocks & shares ISAs has proved a popular one so far. Investment companies including Hargreaves Lansdown and TD Direct have reported that plenty of people have added AIM shares to their ISA portfolios.
The risks
However, you should be aware that investing in AIM companies can be far riskier than taking a punt on FTSE-listed blue chips. They can also be hard to sell, making them potentially illiquid investments.
Do your homework and look at the future growth prospects for any company that catches your eye. And remember that past performance is no guarantee of future returns.
How to invest
If you want to buy individual shares outside of an ISA wrapper, you can buy them via an investment platform such as Hargreaves Lansdown or BestInvest or via a broker. If you want to put them in a stocks & shares ISA, you can again use a broker, platform or a financial adviser, if you prefer.
If you're DIY investing, then you might prefer a self-select ISA, which allows you to pick your investments yourself. Or for a broader mix of companies, you can look at an investment trust that holds AIM companies, such as Throgmorton, Standard Life UK Smaller Companies or BlackRock Smaller Companies.
More on investing:
Beginner's guide to stocks & shares ISAs
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