VCT investment ramps up ahead of tax year close

Investment in venture capital trusts (VCTs) has increased by 18.8% in March compared to the same period last year, analysis by Wealth Club has shown.

Wealth Club suggested that VCT investment hit £144.5m in the four weeks to 25 March.

Most investors are initially attracted to VCTs for the tax breaks and can get up to 30% back in income tax relief up front. Investing £10,000 could get investors up to £3,000 back, while any dividends paid by the VCT are tax-free and growth is also free of capital gains tax.

According to Wealth Club, the recent uptick follows a slower tax year so far, after two boom years, with flows down by 19.8%. Total flows this tax year so far, of £730m, are down on the £910m in previous tax year at the same date.

However, Wealth Club has suggested that popular VCTs are seeing offers fill and close for the tax year, while several other VCTs are approaching full capacity and are expected to close before the end of the tax year.

Founder and CEO at Wealth Club, Alex Davies, said: “It’s been a slower year for VCTs, following two previous boom years. That said, sales are still comfortably above the average over the last 10 years, and are picking up as we approach the tax year end.

“Several popular VCTs, including Northern, Foresight, Octopus Apollo, British Smaller Companies and Albion VCTs have already filled. Others are rapidly approaching capacity, and once those targets are reached the managers will shut their doors for this tax year.

“For regular investors VCTs are an end of tax year ritual like topping up an ISA. The tax breaks are fantastic, the contribution allowance generous and you get to invest in some very fast-growing businesses which would otherwise be difficult to access.”



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