You might be able to use a Venture Capital Trust (VCT) to reduce your tax liability. VCTs are one wealth management strategy that mitigates tax.
What is a Venture Capital Trust (VCT)?
Investors typically gravitate to bigger and more established companies because they offer less risk. To bolster investment in smaller unlisted companies, in 1995 the UK introduced a scheme to encourage investment in those smaller companies. This scheme is known as the Venture Capital Trust (VCT) scheme where investment companies called VCTs focus on smaller businesses.
The scheme has created lots of success stories with many of the businesses eventually acquired by global companies, such as Microsoft.
Investors are rewarded for taking a risk on smaller unlisted companies by receiving UK tax relief. They receive upfront income tax relief of up to 30% and do not have to pay Capital Gains Tax (CGT) on the profitable sale of the company shares in the future. Any dividend payments they receive from the investment will not be subject to tax, and they won’t need to be declared to HMRC.
When to use a VCT
Using a VCT is an effective way to diversify an investment portfolio while also accessing tax advantages. However, you should only do so as part of a long-term strategy. You’ll need to hold your shares for at least five years to be eligible for the tax advantages. If you sell them within this timeframe, you will have to pay money back to HMRC.
How to buy VCT shares
You can buy VCT shares in one of two ways. You can purchase them when they become available again, known as a “new share offer”. Or you can purchase VCT shares through a financial advisory firm.
As VCTs are listed companies themselves, you can purchase shares through a stockbroker on the open market. However, second-hand shares like these do not offer identical tax incentives.
Risks of using a VCT
Using a Venture Capital Trust to mitigate tax liability can be a successful wealth management strategy. Some businesses may grow quicker than others for faster results. However, as with all investments, the investor’s capital remains at risk. VCT investments may be higher risk and using specialist VCTs that focus on a single industry can be even more high risk.
It can also be harder to sell your shares. There is a smaller market for VCT shares compared to listed companies. Moreover, second-hand VCT shares do not offer the buyer the same upfront income tax relief.
VENTURE CAPITAL TRUST (VCT) INVEST IN ASSETS THAT ARE HIGH RISK AND CAN BE DIFFICULT TO SELL.
THE VALUE OF THE INVESTMENT AND THE INCOME FROM IT CAN FALL AS WELL AS RISE AND INVESTORS MAY NOT GET BACK WHAT THEY ORIGINALLY INVESTED, EVEN TAKING INTO ACCOUNT THE TAX BENEFITS.
TAX TREATMENT VARIES ACCORDING TO INDIVIDUAL CIRCUMSTANCES AND IS SUBJECT TO CHANGE.
THIS SERVICE MAY NOT BE SUITABLE FOR NEW CLIENTS.
MEET OUR Director/Wealth Manager
Aman Mashiana
Aman Mashiana is a strategic wealth management professional with more than 15 years’ experience building and leading advisory practices, managing substantial client portfolios, and delivering sustainable revenue growth in competitive financial markets.
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Our initial conversation is entirely exploratory and comes at no cost to you. It’s simply a chance to get to know each other. We’ll discuss your current financial picture, what you hope to achieve, and how we might be able to help. You won't need to sign anything or make any big decisions on day one.
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We don't believe in cookie-cutter portfolios. We take the time to deeply understand your time horizon, your specific life goals, and your personal comfort level with market volatility. From there, we build a diversified portfolio designed to grow your wealth steadily while keeping your risk well within your comfort zone.
Yes. Making money on investments is only half the battle; keeping it tax-efficient is just as important. We actively structure your wealth to minimize Income Tax, Capital Gains Tax, and Inheritance Tax, ensuring more of your hard-earned money stays with you and your loved ones.
Tax planning, estate planning & Inheritance Tax planning are not regulated by the Financial Conduct Authority.
Not at all. We believe great financial planning should be accessible. Whether you are just starting to build your assets, navigating a major life transition, or managing multi-generational wealth, we tailor our advice completely to your current situation and future goals.
Our initial conversation is entirely exploratory and comes at no cost to you. It’s simply a chance to get to know each other. We’ll discuss your current financial picture, what you hope to achieve, and how we might be able to help. You won't need to sign anything or make any big decisions on day one.
We want to make managing your wealth as convenient as possible. We are happy to meet face-to-face at our office, or we can host a secure virtual meeting via video call (such as Microsoft Teams or Zoom) if that fits better into your busy schedule.
We believe in absolute fee transparency, meaning we agree on all costs upfront before any work begins. Depending on the complexity of your needs, our fees may be structured as a transparent percentage of the assets we manage, a flat fixed fee for a specific project, or an hourly rate. There are never any hidden costs or surprise bills.
Absolutely. It's incredibly common to lose track of old workplace pensions over time. We can help you trace your scattered accounts, review their current performance and fees, and—if it makes financial sense—consolidate them into a single, high-performing, and easy-to-manage retirement plan.
We don't believe in cookie-cutter portfolios. We take the time to deeply understand your time horizon, your specific life goals, and your personal comfort level with market volatility. From there, we build a diversified portfolio designed to grow your wealth steadily while keeping your risk well within your comfort zone.
Yes. Making money on investments is only half the battle; keeping it tax-efficient is just as important. We actively structure your wealth to minimize Income Tax, Capital Gains Tax, and Inheritance Tax, ensuring more of your hard-earned money stays with you and your loved ones.
Tax planning, estate planning & Inheritance Tax planning are not regulated by the Financial Conduct Authority.
