Pension Provision Limited? – What about Venture Capital Trusts as an alternative

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As a result of the new restrictions on Pension contributions and the potential suspension of contributions under fixed protection (2016), financial advisors are seeing a marked increase in enquiries relating to Venture Capital Trusts (VCT’s).

VCT’s are a popular way of investing into smaller UK Companies and specialists firms can assist in selecting a portfolio of qualifying investments and monitoring these to ensure they stay within the qualifying rules.

VCT’s offer:

  • The opportunity to invest up to £200,000 in a tax year.
  • The minimum investment is usually £3,000 – £5,000 depending on the VCT.
  • You receive Income Tax Relief at 30% of the initial investment into new shares.
  • Dividends are Income Tax Free.
  • Capital Growth in the share price is Capital Gains Tax free
  • To qualify for the tax breaks you need to keep the shares for five years and you must have taxable income in the current tax year to match the level of payments you intend making. They are designed as long-term investments.
  • New Share Issues generally appear from November onwards and can be taken up very quickly for the most popular VCT’s.

It should be remembered that there are risks associated with investing in VCT’s not least because they invest in small, unquoted or AIM listed companies. However investing with the help of specialist IFAs can help to minimise any such issues and provide you with a choice of potential providers.

If you are interested in looking at VCTs as an alternative method of generating tax reliefs and some potential tax free income please give Sue Stephens a call for further information.