Venture Capital Trusts
Discussion
Investing in VCT's is less profitable than it used to be given the top rate of tax relief is restricted to 30% that said decent returns still possible given technically therefore your investment can drop that 30% before you are any worse off.
Plenty of companies specialising in them although I've found some like Octopus definitely have made me more than others.
Ease of handling the account and paperwork always excellent.
EIS investing also worth considering.
Plenty of companies specialising in them although I've found some like Octopus definitely have made me more than others.
Ease of handling the account and paperwork always excellent.
EIS investing also worth considering.
I invested in 4 VCTs back in the dotcom bubble, partly to take advantage of the CGT deferral. Out of these, only one (Baronsmead) has retained the same name (though its management team was recently bought out); the other 3 have all had multiple mergers, restructurings etc. They're an entirely passive investment for me. I don't track performance at all closely but feel that overall it's fallen a little short of a FTSE tracker over the 18+ years. Tax-free dividends are a boost - basically these now pays my council tax and one or two other utilities (I have a strange ability to earmark specific investments for specific needs!). Of late, some of the dividends have felt more like capital distributions as the managers claim they can't source sufficient new investments to replace positions they've exited - I'm not sure if this is a temporary problem or reflects a more stringent tax regime for them.
I've not looked at EIS funds but have have held several individual company EIS/SEIS investments. These are as high up the risk spectrum as most investors would ever contemplate. I wouldn't recommend this route unless you're prepared to do huge due diligence,trust the management, accept that you'll be locked in for many years (occasionally you might be able to sell to another shareholder but generally not), may face further cash-calls, struggle to get information if the business is doing poorly and of course run a high risk of total loss (in which case the negligible value tax regime will slightly soften the blow). EIS funds would give useful diversification but you'd be paying management charges on top.
Don't ever be bamboozled by sales agents on these things, putting far too much spin on the tax benefits. There's a reason the generous tax benefits exist!
Circling back to VCTs, February and March tend to be the months when they are most heavily marketed as people seek to reduce their tax bills, eg if bonuses take them up a bracket. Allenbridge used to be the go-to source of advice on current VCT offerings but I sense they're not so active now; perhaps BestInvest offer a similar service?
I've not looked at EIS funds but have have held several individual company EIS/SEIS investments. These are as high up the risk spectrum as most investors would ever contemplate. I wouldn't recommend this route unless you're prepared to do huge due diligence,trust the management, accept that you'll be locked in for many years (occasionally you might be able to sell to another shareholder but generally not), may face further cash-calls, struggle to get information if the business is doing poorly and of course run a high risk of total loss (in which case the negligible value tax regime will slightly soften the blow). EIS funds would give useful diversification but you'd be paying management charges on top.
Don't ever be bamboozled by sales agents on these things, putting far too much spin on the tax benefits. There's a reason the generous tax benefits exist!
Circling back to VCTs, February and March tend to be the months when they are most heavily marketed as people seek to reduce their tax bills, eg if bonuses take them up a bracket. Allenbridge used to be the go-to source of advice on current VCT offerings but I sense they're not so active now; perhaps BestInvest offer a similar service?
I have a few VCTs - Hargreaves Hale, Proven and Unicorn. I bought primarily to generate a stream of tax free income which they do well. They've generally performed ok, particularly on an after tax basis.
Bear in mind you need to hold for five years or you lose the tax benefit so they are a long term investment. The costs can be high, both up front and ongoing. The upfront you can mitigate via a broker like wealth club. Best invest do some fairly limited research.
Id probably max out ISAs and pension contributions first but if you've done that then they may be a good option. Worth taking proper advice.
Bear in mind you need to hold for five years or you lose the tax benefit so they are a long term investment. The costs can be high, both up front and ongoing. The upfront you can mitigate via a broker like wealth club. Best invest do some fairly limited research.
Id probably max out ISAs and pension contributions first but if you've done that then they may be a good option. Worth taking proper advice.
williaa68 said:
I have a few VCTs - Hargreaves Hale, Proven and Unicorn. I bought primarily to generate a stream of tax free income which they do well. They've generally performed ok, particularly on an after tax basis.
Bear in mind you need to hold for five years or you lose the tax benefit so they are a long term investment. The costs can be high, both up front and ongoing. The upfront you can mitigate via a broker like wealth club. Best invest do some fairly limited research.
Id probably max out ISAs and pension contributions first but if you've done that then they may be a good option. Worth taking proper advice.
Thanks all. I’m maxed out on ISA and can’t pay any more into the pension hence the interest in VCT’s.Bear in mind you need to hold for five years or you lose the tax benefit so they are a long term investment. The costs can be high, both up front and ongoing. The upfront you can mitigate via a broker like wealth club. Best invest do some fairly limited research.
Id probably max out ISAs and pension contributions first but if you've done that then they may be a good option. Worth taking proper advice.
I’m ok with long term such as 5 years plus but a bit concerned that these investments can apparently be hard to sell at all.
Maybe I’ll still to shares, funds & bonds and just pay the tax.
If you're careful to harvest capital gains and stick to low dividend yielding investments then you can run about £100,000 in a taxable account without paying that much tax.
If you're going to run VCTs and don't need the dividend income, note many of the funds offer dividend reinvestment into new shares, meaning you can claim 30% income tax back on the reinvested dividends - potentially very pleasant.
If you're going to run VCTs and don't need the dividend income, note many of the funds offer dividend reinvestment into new shares, meaning you can claim 30% income tax back on the reinvested dividends - potentially very pleasant.
This explains why the secondary market in VCTs is so thin https://www.moneyobserver.com/our-analysis/tax-eff... All 4 of mine are now listed, but none was back in 2000 when I invested. As the article says, the VCT manager will sometimes repurchase shares at a better price than selling in the secondary market. That said, it helps to view them as a "hold for a very long time" investment.
Gassing Station | Finance | Top of Page | What's New | My Stuff