Venture Capital Trusts
Enjoy up to 30% tax relief & tax-free dividends with Venture Capital Trusts.
What are Venture Capital Trusts?
VCTs (Venture Capital Trusts) are a type of Investment Company that invests in small UK businesses. Because the Government wants to encourage investment into these growing businesses, VCTs provide several generous tax benefits. VCTs can potentially give you higher returns but they also come with extra risks, as the companies they invest in can be harder to sell.
The Benefits of Investing In VCTs
While Venture Capital Trusts are a higher risk form of investment, the UK Government provides a number of appealing perks to individuals who invest in them. This includes getting a 30% income tax rebate on new investments up to £200,000 per tax year. It’s worth noting, however, that you must have held the investment for five years and have paid the correct taxes to redeem this perk.
Who are VCTs right for?
Venture Capital Trusts are a great option for individuals looking to diversify their portfolio with tax efficient investments. VCTs are best for investors who are able to invest for a minimum of five years, as they expose investors to greater risk than some other investment products. If you have used your pension and ISA allowances, you may want to add VCTs to your investment portfolio.
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Why BulbFin?
BulbFin works with top financial planning and wealth management firms to help discerning individuals find the right advice. Our advisers are all FCA regulated experts with strong track records working with affluent, high net worth and ultra high net worth individuals, or those who are due to inherit large sums. Click start now to request a call back from one of our experienced partners.
Frequently Asked Questions – VCTs
What is a VCT?
VCTs are listed companies that invest in a diversified portfolio of smaller and unquoted companies in the early stages of their growth. This includes companies who are AIM* listed.
The Government incentivises investing in early-stage firms as supporting an innovation-driven economy generates significant benefits including more jobs and wealth creation.
*The AIM (Alternative Investment Market) is a specialised unit of the London Stock Exchange (LSE) for smaller, more risky companies.
Its worth speaking to a financial services expert to find out if investing in VCTs is right for you.
Is investing in VCTs a tax efficient way to save for retirement?
It can be if you have used up your annual or lifetime pension allowances and annual Isa allowance.
VCTs can be particularly useful for higher earners whose annual pension allowance has been tapered back to between £4,000 and £40,000.
Why not schedule a call with one of BulbFin’s expert financial advisers. On that call, we will help you make an informed decision as to whether investing in VCTs is right for you.
What tax relief can I expect on VCTs?
You can currently claim up to 30% income tax relief on VCTs and the maximum annual investment you can claim tax relief on is £200K.
VCT shares must be held for a minimum of five years in order to permanently keep the tax relief.
There is no capital gains tax (CGT) to pay when you dispose of the VCT.
Tax reliefs depend on individual circumstances and may change in the future and being able to successfully claim tax reliefs depends on the VCT maintaining its VCT-qualifying status.
Find out more. Contact Bulbfin to set up a call.
What is the difference between VCTs and Enterprise Investment Schemes (EIS)?
The key differences between VCTs’ and EISs are the tax reliefs and investment approaches. It’s important to use the right one for your financial and tax planning needs.
Both have 30% income tax relief but with an EIS the minimum hold period is 3 years and a VCT is 5 years. However, it could take longer to exit an EIS as exits generally happen when the managers sell a company.
Who do you recommend VCTs for?
A VCT could be considered as part of a tax-efficient portfolio for retirement however it’s important to understand the risks before you decide to invest. The value of an investment and income from it can fall as well as rise and you may not get back the full amount you invest.
Talk to one of our experts and we will advise on whether investing in VCTs is right for you and your retirement planning.
How many types of VCT are there?
There are various different types of VCT:
Generalist VCTs – the most popular as they invest in a wide range of companies at various stages of development, in all different sectors.
Specialist VCTs – tend to invest in companies within one specific sector.
AIM VCTs – invest into companies which are, or are about to be, listed on the AIM market.
Limited life VCTs – designed to be lower risk and aim to invest capital and then wind up and distribute assets to shareholders within five to seven years.
What are the risks of investing in VCTs?
Any investment carries a degree of risk.
Investing in early-stage companies is high risk, so attractive tax reliefs are also available to compensate you for some of that risk.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.
You need to be comfortable with the risk levels and it is important to have a long-term investment horizon and not to invest money that you might need in the short term.
An investor may not get back the amount invested.
If BulbFin is free how do you make money?
It’s true! Our advice is free. We select you the perfect financial planners based on the information you provide us with. All of our partners are regulated by the Financial Conduct Authority and we only ever work with a refined list of firms who withstand our robust selection process. Our partners pay us a small commission if you elect to use their service.
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Risk Warning
Any investment carries a degree of risk and your investments may decrease in value or fail. The levels and bases of taxation and reliefs can change at any time and are dependent on individual circumstances.