The looming uncertainty in the UK’s stock market has investors on edge. With Chancellor Rachel Reeves set to reveal the government’s budget on 30 October, many fear that inheritance tax relief on AIM-listed companies could be on the chopping block. This potential change could have ripple effects on the market, particularly impacting small caps and penny stocks.
Here are some key points to consider in light of this upcoming budget announcement:
- Possible consequences: Scrapping inheritance tax relief on AIM-listed companies could lead financial advisers to advise their clients to sell these stocks to prevent potential losses. This move is part of the ‘consumer duty’ rules aimed at protecting clients from unforeseen risks.
- Market reactions: If implemented, estimates suggest that ending this tax break could result in a 20%-30% decrease in the value of AIM-listed shares. This uncertainty has already caused the number of companies on the London Stock Exchange’s junior market to decline significantly in recent years.
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Short-sighted decision: While axing the tax break could generate £1.6bn annually, it may not be a wise move in the long run, especially for a market struggling to attract listings. This could further deter private businesses from going public, exacerbating the situation.
Personal stance and strategy:
As an investor with a stake in AIM-listed shares, I am considering my options in response to these potential changes. Rather than panic selling, I see a market downturn as an opportunity to capitalize on undervalued stocks. One such stock I have my eye on is Keystone Law Group (LSE: KEYS).
Keystone Law Group is a network-style law firm known for its unique business model. The company has shown consistent revenue growth and profitability, making it an attractive investment. Additionally, its dividend yield of 3.2% adds another layer of appeal for investors.
Looking ahead, economic uncertainties and shifts in wealthy residents’ demographics may impact Keystone’s performance. However, the company’s flexible work model and leadership under founder James Knight position it well for growth in the long term.
In conclusion, while the upcoming budget announcement may bring volatility to the market, it also presents opportunities for savvy investors. Keeping a close eye on developments and being prepared to seize opportunities could lead to profitable outcomes in the long run. As we approach Halloween, I’ll be looking to leverage potential market scares to strengthen my investment portfolio.
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