Three AIM listed companies that could cut your IHT bill
A legal underdog
A defence specialist
A property player
Two professional portfolios
Market leading resources
Quality focused performer
Ellie Sawkins, Investment Analyst at Wealth Club said:

“It’s been a difficult couple of years for AIM, and smaller companies more widely. Not only have UK smaller companies underperformed, but changes to IHT tax relief announced in the Autumn Budget have only piled on the problems for AIM.

The result is that AIM valuations are close to 10-year lows. This could make AIM attractive to experienced investors comfortable with the higher risks, particularly given the tax reliefs still available.

Investors considering an investment in AIM have two options: professionally managed AIM ISA portfolios, or DIY portfolios, if you have the time and inclination to research and select qualifying AIM shares yourself. We’ve highlighted some potential options for each strategy below.”

Three stocks for DIY portfolios

Keystone Law Group – c.3.4% yield. (Legal services)
Keystone Law Group (“Keystone”) is a challenger law firm.

The firm recruits senior lawyers from mid-market law firms who can bring existing client books with them. To attract top tier talent, it offers generous fee sharing terms, which can mean a significant jump in pay compared to traditional firms. Each lawyer works on a self-employed basis, providing them with freedom and autonomy, while administration and support needs are met by Keystone’s internal resources.

Keystone now has 455 principals, with 50 added in the most recent year. More often than not, new recruits are joining from the UK’s “leading law firms”, demonstrating Keystone’s ability to lure the best talent.

As a result of its strong recruitment activity and continued client demand, the firm expects revenue to exceed market expectations of £94 million, representing a gain of more than 7% compared to the year prior.

Given its capital-light model, as long as Keystone continues to attract talent (and their billable books) the business has plenty of room to scale.

Managers backing Keystone include Unicorn and Whitman.

Cohort – c.1.2% yield. (Defence)
Cohort was formed in 2006 and acquires niche technical businesses in the defence sector. Currently, the Group’s capabilities cover everything from sonar and surveillance technology to cybersecurity and digital forensics.

As you might expect, global tensions and ongoing conflicts in both Israel and Ukraine have led to a significant uptick in defence spending. This is reflected in Cohort’s most recent interim results, which saw its order book hit a record high of £541.1 million, a mighty 53% bump on the previous period.

The UK is the group’s largest customer by some margin (accounting for c.60% of revenue). That should leave the company well positioned to benefit from the largest sustained increase in defence spending since the Cold War.

Managers backing Cohort include Downing, Octopus, RC Brown, Unicorn, and Whitman.

The Property Franchise Group – c.2.8% yield. (Estate and lettings agency)
The Property Franchise Group (“TPFG”) is the largest property franchise business in the UK.

What started out as a single estate agency in Yeovil in 1986, has since expanded to a collection of 18 brands across a network of over 150,000 properties.

2024 was a significant year for the group after it merged with competitor, Belvoir, and acquired GPEA Limited. Both transactions added material scale and market reach to the business, significantly bolstering its financial services offering, as well as adding a new revenue stream through GPEA’s licensing model.

The combined effect was a 146% increase in revenues to £67.2 million. And while the two transactions were key contributors, TPFG’s underlying business also delivered solid organic growth, with like-for-like management fees up across both lettings and sales.

Although there has been lots of coverage about landlords ditching their buy-to-lets, the group is set to benefit from the upcoming Renter’s Rights Bill, which is likely to make property management more arduous and push landlords towards agencies. This, combined with falling mortgage rates and cost synergies from the acquisitions, could create a significant tailwind for TPFG.

Managers backing TPFG include Downing, Puma, Unicorn.

Two professionally managed portfolios

Octopus AIM Inheritance Tax Service
The largest service of its kind, the Octopus AIM Inheritance Tax Service manages £1.4 billion.

The service is managed by a team of quoted specialists, who focus on large, growth focused companies. While this has been a headwind in the last few years, and performance has suffered, the scale of the service adds significant operational advantages and the portfolio should be well placed if the market turns in favour of larger, growthier names.

Companies the team invest in include pub company Young & Co’s Brewery, online training provider Learning Technologies Group, and buildings product supplier, Brickability Group.

Puma AIM Inheritance Tax Service
The Puma AIM Inheritance Tax Service targets mature AIM businesses screened against three key metrics: quality, growth and value. The team prefer companies that are family-owned or founder-controlled and will consider stocks with market caps as low as £50 million (although the portfolio average sits much higher at c.£400 million). Notably, the team steers clear of the AIM market’s increasing number of early-stage businesses, biotechnology businesses, and high growth concept stocks.

Companies they invest in include engineering service provider Renew Holdings, scientific instrument supplier Judges Scientific, and car dealership group Vertu Motors.