Specialist Tax-Efficient Investments (VCTs, EIS, and Business Relief)

Aug 18, 2024 | Investments, Planning for Businesses

VCT Season is Here! A Great Opportunity for Income and Dividend Taxpayers

As VCT season kicks off this month, it’s a timely reminder of the unique benefits these and other tax-efficient investments offer. For UK investors facing limitations in their pension funding due to the annual allowance taper or those burdened with heavy income and dividend tax bills, VCTs and EIS can be a great solution. And Business Relief can be a powerful estate planning tool.

  • VCTs: A Versatile Investment Option

Venture Capital Trusts (VCTs) are a popular choice for investors seeking tax relief. By investing in VCTs, you can claim income tax relief of up to 30% on your investment, and your investment is exempt from capital gains tax on disposal and no tax on dividends too. Added to the fact that, VCTs offer the potential for significant returns, where the underlying companies within the portfolio really take off.

Although VCTs invest in smaller companies this doesn’t necessarily mean startups and it doesn’t necessarily mean small either. Companies can be very well established and listed on the AIM market (the FTSE’s little brother).

 

  • EIS: Supporting Growth Companies

The Enterprise Investment Scheme (EIS) is another attractive option for investors looking to support innovative, early-stage companies. EIS investments can qualify for income tax relief of up to 30%, and there’s also the potential for capital gains tax relief. EIS can be a high-risk investment, but it also offers the potential for substantial returns.

EIS also benefits from loss relief, so you can make an overall gain but still have losses to offset against CGT gains in other holdings.

 

  • Business Relief: Protecting Your Business Assets

Business Relief provides a valuable tax advantage for those who own and operate businesses. By qualifying for Business Relief, you can potentially reduce the Inheritance Tax (IHT) liability on your business assets. This can be particularly beneficial for family-owned businesses.

These solutions have now been around for many years and have a great track record of delivering for clients. For most, the 40% IHT saving is the driving force but you can also couple this with respectable returns.

 

  • Why Consider These Investments?

Tax Efficiency: VCTs, EIS, and Business Relief offer significant tax advantages, making them attractive to investors seeking to reduce their tax burden.

  • Diversification: These investments can help diversify your portfolio and reduce your overall risk.
  • Potential for Growth: VCTs and EIS offer the potential for significant returns, particularly if the underlying companies succeed.
  • Supporting the Economy: By investing in VCTs and EIS, you’re supporting innovative businesses and contributing to the UK economy.

At GoddardFry Wealth Management, we can help you explore these specialist tax-efficient investments and determine if they’re suitable for your financial goals.

Our experienced advisors will work with you to understand your individual circumstances and provide tailored advice.


By Alex Fry (Managing Director)
alex@goddardfry.co.uk