Last August, the government finally removed the frustrating and illogical restriction that prevented Aim (Alternative Investment Market) stocks from being held in an Isa. This has made stocks on the UK’s smaller companies board especially attractive from a tax perspective. In addition to now receiving tax relief on dividends and capital gains when held in an Isa, many continue to be exempt from inheritance tax under the Business Property Relief rules. What’s more, Aim stocks will be exempt from stamp duty with effect from April 2014.
Those who prefer more stable, established companies may conclude that this won’t benefit them. But that’s not necessarily the case. While Aim is mainly for smaller, riskier companies, there are also a number of established firms that have never made the jump to the main board. Online retailer ASOS (Aim: ASC) has long been the most famous example – it’s large enough to make it into the FTSE 100 had its Aim status not ruled this out. Perhaps the most interesting for conservative investors are a number of stable, cash-generative, dividend-paying businesses, many of which are family-controlled and are on Aim to take advantage of less stringent rules on free float.
Popular choices include flooring specialist James Halstead (Aim: JHD), retailer Majestic Wines (Aim: MJW), soft drinks maker Nichols (Aim: NICL) and pub chain Young’s (Aim: YNGA (ordinary) and Aim: YNGN (non-voting)).
See also:
• Isas make sense – so act quickly
• Cash Isas: Get a better rate on your savings
• Funds Isas: How to pick the best platform for you
• Stocks & shares Isas: It pays to compare brokers
• Adventurous investing: Spice up your Isa with exotic investments
• Sipps: Take control of your pension
• See our full Isa coverage here