Junior AIM index posts biggest daily gain in four years as tax raid turns out to be smaller than feared.

The AIM junior index posted its biggest daily gain in four years after a feared tax raid turned out to be less damaging than expected.

The Chancellor said AIM shares, which are typically smaller, fast-growing companies that need support from investors, would no longer be fully exempt from inheritance tax (IHT).

But rather than abolishing the relief entirely as feared, which could have subjected them to a 40 per cent hit, they will attract a 20 per cent inheritance tax rate if held for more than two years from April of 2026.

Investors reacted with relief that Rachel Reeves’ tax raid was not more severe and the AIM index rose 4.3 percent, its biggest daily gain since April 2020.

Rob Morgan, chief investment analyst at wealth manager Charles Stanley, described it as “a small blow to AIM” rather than “a knockout”.

Fears that the relief will be removed have weighed on AIM in recent months, with Peel Hunt warning that its abolition would see 15 per cent of cash withdrawn from the index overnight, causing it to fall to a 30 percent.

Abby Glennie, manager of the Abrdn UK Smaller Companies fund, said: ‘The Government did not throw in the hand grenade for AIM entrepreneurs and investors that many expected.

However, IHT applied to AIM assets at 20 per cent still makes investing in the market less attractive than before.’

The Budget also scrapped inheritance tax relief for family businesses and farms worth more than £1m.

Businesses and farms worth less than that will continue to enjoy 100 per cent relief (meaning no tax will have to be paid when passed on to their children) from April 2026.

But the relief will be reduced to 50 per cent on anything over £1m, meaning they will face a 20 per cent tax.

Idina Glyn, partner at law firm Mishcon de Reya, said: ‘The budget has dealt a swift blow to the foundations of our local communities and the rural economy.

This limit will increase the inheritance tax that a substantial number of businessmen and landowners must pay, and not just the ultra-rich.

The key question for many farmers and entrepreneurs is whether they will have a viable business to pass on to their successors after clearing the new tax obligations.’