Venture Capital Trust

In addition to the traditional annual tax year ISA and Pension allowances it might be worth considering an investment in a Venture Capital Trust (‘VCT’) Company.

Under current legislation, a VCT will provide the investor with:

     Income Tax free share dividends

      Income and Capital Gains Tax free Growth on disposal.

    A 30% income tax rebate in the tax year of investment.

For example, a £10,000 VCT investment subscription during the 2023/2024 tax year will generate a £3,000 income tax relief certificate for the current tax year.

The only stipulation is that you must hold the investment for at least 5 years to keep the income tax rebate. You may however sell them within the initial 5-year period provided you repay the income tax relief received.

VCT are considered slightly less liquid to sell, but there are market makers who will assist in that regard when the time comes and fund managers invariable have regular buy back schemes.

VCT investing is higher risk than investing in the more traditional collective investment funds.

The underlying investments are heavily invested in small UK Businesses and AIM quoted stocks, where the risk of failure is higher. However, many clients over the last 20 years have benefited in terms of the immediate income tax relief, year on year income tax free dividend income, and capital gains tax free capital growth.

There are no guarantees as the future value in terms of capital growth and income and the value of your investment may decrease in value.

A useful independent guide to have a read through can be found here https://www.theaic.co.uk/your-guide-to-investment-companies/vcts