Which shares are exempt from UK inheritance tax?

UK tax authorities have allowed some classes of shares to be handed down after death without the need for the beneficiary to pay tax on transfer. But which ones qualify?

The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results

Chris Boxall, from Fundamental Asset Management, explains that shares allowed to be transferred without a tax liability are all listed on the London Stock Exchange’s junior market: Alternative Investment Market (AIM). Crucially, however, not all AIM-listed shares qualify. Chris says it can be an extremely expensive error to hold unqualified stocks at the wrong moment.

Because the tax authorities do not provide a definitive list of shares that qualify, the challenge for investors keen to shelter money under the scheme is to continuously audit their portfolio to ensure that the shares they invest in remain on the list of approved companies.

Boxall explains that there are circumstances where a company can qualify initially, but a change in some aspect of its operation may then lead to it being excluded from the list. He also emphasises the need to continuously research the shares that you have in any portfolio to ensure that you maintain the returns that you require to hit your investment goals.

Boxall looks at some of the reasons as to why some companies’ shares may not be allowed under the scheme, including a dual listing, or if they hold ‘excepted assets.’

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