The clue is in the name “Venture.”
A VCT is a Government approved vehicle to encourage investment into certain smaller companies’ tax efficiently.
There are different levels of risk. Some are very high and others are less risky yet still carry a level of risk.
The main features:
- Income Tax Relief of 30% of any investment made. If you were to invest £10,000 the tax man will give you a cheque for £3,000 as long as you have paid that much income tax.
- Any dividend is tax free
- Any Growth is tax free
- They have to be held for 5 years or you lose the tax break.
- Not necessarily easy to sell at the end of five years.
- You may not get back all you paid in.
- Some VCT’s have an objective of protecting capital value and paying a dividend of 5% per annum (tax free income).
Who are they for?
- Someone who wants to diversify away from a pension, and would like tax relief
- Someone who has non pensionable income such as a landlord and would like tax relief
- Someone who is happy to commit their money for 5 Years
- Someone who would like a tax free dividend