Interactive Investor

AIM ISAs explained

Learn how to build an AIM ISA portfolio to invest in smaller growing companies.

Make your money go further

Important information - investment value can go up or down and you could get back less than you invest. If you're in any doubt about the suitability of a Stocks & Shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.

The Alternative Investment Market (AIM) is a small part of the London Stock Exchange (LSE). It exists to help smaller companies access capital from the market.

Investments in the AIM carry a little more risk due to the size of companies on offer, and the fact regulations and listing requirements are more relaxed than on the LSE.

An AIM ISA simply means using the money you hold in a tax-efficient Individual Savings Account to invest in those smaller companies.

What are AIM listed shares?

The AIM allows small and fast-growing companies to raise capital to fund growth. AIM offers lower costs and fewer regulatory requirements to list than the London Stock Exchange's main market.

LSE's main market requires companies to:

  • have existed for three years, 
  • have a market value of at least £700,000,
  • be ready to float at least 25% of their share capital,
  • and have enough money for at least one year's trading.

The AIM market has less stringent requirements to let smaller companies access investor capital. 

How does the AIM market work?

The AIM market opened in 1995 to cater for smaller companies. These companies join AIM by following a similar process to launching an Initial Public Offering (IPO), but with fewer requirements.

These relaxed guidelines make the market riskier, and give it a reputation as a more speculative investment forum.

Despite this additional risk, AIM has helped more than 3,800 companies raise over £115 billion since opening (source: London Stock Exchange).

What is an AIM ISA?

An AIM ISA is a portfolio of AIM shares. Within an ISA, your profits are free from income tax, capital gains tax and dividend tax. Alongside these tax efficiencies, investing in AIM shares means you can also be exempt from inheritance tax (IHT), making AIM ISAs – also known as AIM IHT ISAs – attractive tax wrappers.

AIM shares need to qualify for Business Property Relief (BPR) and be held for more than two years at the time of death to qualify for IHT exemption.

BPR is generally not available through funds, so to qualify you must be invested directly in shares - though there are exceptions.

Benefits of AIM shares in your ISAs

  • Tax-free income and growth

Like any ISA investments, you will not have to pay capital gains tax on profits you make, and you will not be taxed on dividends. AIM shares are also exempt from stamp duty

  • Passing on more wealth

Certain AIM shares qualify for Business Property Relief. This means that after being held for two years, the value of any qualifying AIM shares in your ISA will be excluded from your inheritance tax calculation. You must have held these shares for at least two years and still be holding them on your death for them to qualify for exemption. 

Investing in AIM shares via an ISA means that you benefit from tax breaks and your beneficiaries can receive 100% of the value.

  • Access 

Anyone can benefit from the tax break by investing in their own ISA or via an AIM IHT ISA portfolio run by a fund manager. The only limitation is the annual ISA allowance. Other ISA assets from previous tax years can be transferred to AIM IHT portfolios. 

AIM investment risks

  • If your Stocks and Shares ISA is your main source of investment, then focusing on AIM shares is a risky strategy. 
  • Generally, AIM shares are best used as part of a balanced portfolio to reduce investment risk
  • AIM shares can be harder to sell because of reduced liquidity in the market.  
  • Future changes to inheritance tax rules could affect your estate planning. Investing in AIM shares for the IHT benefits is only worth it if your estate is big enough to be affected by IHT in the first place. 
  • A particular company may not continue to qualify for Business Property Relief. HMRC decides which companies qualify for BPR and they may change their eligibility rules or could scrap the relief altogether.

How to invest in AIM shares with interactive investor?

ii offers access to three levels of the AIM market: indices that incorporate either the top 50, 100 or all companies listed on the Alternative Investment Market.

Read the latest AIM and small-cap news

The AIM market can be volatile and hard to navigate, but our award-winning financial experts can help you. We publish regular news articles on AIM shares to keep you in the know, and our Super 60 investment range features a section on AIM stocks to help you diversify your ISA portfolio.

Get the lowdown on smaller company shares and all that matters on the junior market.

AIM and small-cap news


Invest for a better future with a great value, tax-efficient AIM stocks and shares ISA. Start today from only £4.99 a month.