The Rising Popularity of VCTs

Venture Capital Trusts (VCTs) were set up over 22 years ago in 1995, with the aim of providing long-term finance to small companies in the UK, propelling economic growth and, in turn, reducing unemployment.

VCTs have been becoming much more popular in recent years, raising £542 million in the last tax year. This is an increase of 18% from the year before, but why is this?

Pensions

Many people are looking towards VCTs in order to boost their strategy for later life and avoid running the risk of hitting the lifetime allowance. VCTs are also becoming more attractive to those saving for pensions due to their ability to generate tax-free dividends for investors.

Investing

VCTs are also rising in popularity due to the tax benefits and reliefs they bring, including their ability to generate tax-free dividends. These dividends are not set in stone, however, and it should be noted that like all investments, the value of VCTs can decrease as well as increase.

As well as this, those who are investing in property may be feeling the pinch as a result of higher charges on buy-to-let properties as well as a reduction in tax relief on mortgage interest. This is likely to have driven many investors away, potentially to investing VCTs.

What next?

Depending on your attitude towards risk, there are many reasons to consider VCTs. If you’re looking for financial advice regarding investments and VCTs, talk to our financial advice team. Please call on 01926 492406 or email us at enquiries@klofinancialservices.com to make an appointment.