Resources List
UNDER Venture Capital Trusts
Reasons to consider investing in a VCT
VCTs focus on smaller companies that meet the qualification criteria and are not listed on the main market of the London Stock Exchange. These smaller firms often have greater growth potential compared to larger listed companies. Established VCTs provide investors with a diversified portfolio of these businesses, offering an appealing entry into this sector. That said, investing in VCTs comes with high risks, and there’s a chance you may not recover your full investment.
Tax benefits
Investing in new VCT shares offers several tax benefits on investments up to £200,000 per year. These include:
- Income tax relief – Investors can claim up to 30% upfront relief on their income tax, provided the VCT shares are held for at least five years. For example, a £10,000 investment could reduce your income tax bill by £3,000, although this is limited to the amount of tax owed.
- Tax-free capital gains – If VCT shares are sold at a profit, the gains are exempt from capital gains tax.
- Tax-free dividends – Any dividends received from a VCT are not subject to tax and do not need to be declared on your tax return.
Add diversity to your portfolio
The value of listed company shares can be influenced by global market trends and external events. However, smaller firms often follow a different investment pattern, more closely tied to their own performance. This distinction can make VCTs a valuable addition to a well-diversified investment portfolio.
Supporting UK innovation and economic growth through VCTs
Investing in a VCT means backing smaller, innovative companies that contribute to job creation and economic growth across the UK.
Complementing other investments
By investing in a VCT, you’re supporting innovative small businesses that drive job creation, economic growth, and prosperity throughout the UK.
An additional source of income
The tax-free dividends offered by VCTs can serve as a valuable source of extra income, particularly for those nearing or in retirement.