Reducing your tax liability with VCTs

Maximising your annual pension allowance is not the only way you can reduce your tax liability. There are various other shelters and allowances, including ISAs and your Capital Gains Tax allowance. After that, what are your options?

How does 30% tax relief sound? If you have an appetite to reduce your tax bill and are happy with a slightly higher level of risk, you might want to consider a Venture Capital Trust.

What are Venture Capital Trusts (VCTs)?

VCTs are investment trusts that invest in start-up companies who are usually looking for money to further develop their business. Zoopla and Hidden Escapes are two examples.

Like a standard investment trust, a VCT has its own listing on the stock market. But, because they’re characteristically very small, relatively undeveloped businesses, they inherently carry greater risk than a standard investment trust.

5 reasons to consider a VCT

  1. Investing in a VCT comes with the benefit of 30% tax relief. That’s £3,000 for every £10,000 invested, up to a maximum contribution of £200,000 in each tax year.
  2. VCTs can provide growth which is free of Capital Gains Tax (CGT)
  3. VCTs can provide tax free dividends to supplement income
  4. VCTs act as a diversifier to an existing investment portfolio, providing you are happy with the higher level of risk
  5. Landlords often pay higher rates of income tax on their property portfolio but their income doesn’t qualify as relevant earnings towards pension contributions. VCTs offer a way of accessing income tax relief.

If you have maxed out your annual or lifetime pension allowance and are looking for other tax efficient investment opportunities, you may want to at least explore investing in a Venture Capital Trust.

As always, you should speak to your financial adviser before you make any investment decisions.

Have you ever considered Venture Capital Trusts to reduce your tax liability? Let us know below.

Source: Money Week

Legal & Medical Investments Ltd is authorised and regulated by the Financial Conduct Authority. The Financial Conduct Authority does not regulate tax advice. The tax reliefs referred to are those currently applying in the United Kingdom to UK Tax Residents. These tax reliefs are liable to change. The value of any tax relief available will depend upon the individual circumstances of the taxpayer.

Leave a reply

Your email address will not be published. The name, email and comment fields are required.

We use cookies to ensure that we give you the best experience on our website. If you continue we'll assume that you are happy to receive all cookies from this website. Read more Close