For savvy investors, a Venture Capital Trust may provide unparalleled return potential as well as tax benefits. Investments made in VCTs provide a boost to the overall economy, and those who venture into this space may benefit from a great return on their investment.
What exactly is a VCT investment?
This specific type of investment is one made in the future of a small business. These businesses are often already up and running, but they require additional capital to get to the next level. Capital needs can be a huge barrier to a company’s growth potential, and that’s where the VCT comes in. Investments are made in well-researched companies with enormous potential.
What types of returns are possible with a VCT investment?
An investment of this type has very good return potential. However, with solid return potential also comes risk, and these types of investments are not suitable for all investors.
Once an investment in a VCT matures, it pays dividends twice per year. In addition to the regular dividend payments, the investment may also pay special dividends in the event that the company sells some or all of its shares. Finally, if a company is successful, then the value of the shares in that company may go up, thus providing an investor with the opportunity to sell his or her shares at a profit.
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A venture capital trust may have huge tax benefits
Here in the UK, the government tries to incentivise investments in the small business sector because these businesses are the future of the economy. Therefore, tax benefits are provided for investments made in small businesses. Some of these benefits include:
- Taxes are not paid on any dividends received
- No capital gains tax will be assessed on sales of shares, even if sold before the five-year mark. However, the shares need to be held for 5 years in order to qualify for the income tax relief.
- Tax relief may be available on investments of up to £200,000 per year
Wondering if this type of investment is right for you?
While these investments may provide significant return potential and tax savings, they are not suitable for everyone. Generally speaking, investments might make sense for those who:
- Have some risk capital to invest
- Pay taxes in the UK and are looking for tax-efficient strategies
- Have a time horizon of several years
- Are looking for alternative investment strategies to complement more traditional investments
The world of Venture Capital investments is an exciting arena that’s full of opportunity and potential. As well as potential financial gains, investing in small business provides a feel good factor as with our help, they may become the large companies of tomorrow. If you are interested in VCTs but are not sure if they are right for you, please visit our website for more information. In addition, please take the time to speak with one of our representatives by phone who can help guide you through the investment process and answer any questions you may have. What are you waiting for? The opportunities of tomorrow begin today.