Why Invest in a VCT?
VCTs are attractive to investors because of the tax relief they carry. Investors may subscribe for up to £200,000 new shares per tax year and receive income tax relief at the rate of 30% on the amount invested, if the shares are held for at least five years. A disposal of shares in a VCT is also exempt from capital gains tax and dividend payments are exempt from income tax. The favourable tax treatment that VCTs attract makes them appealing to many investors, especially when compared to pension plans. Although pension plans benefit from an upfront tax relief of 40%, payments out of pension plans are subject to tax at 20% (assuming the individual is a basic rate tax payer). The result is that many high earners are better off investing in VCTs than in pension plans. For example, say you contributed £10,200 to a VCT. This would be worth £14,571 after 30% tax relief. Invested over 25 years with 4% growth, the pot would be worth £631,095, producing a tax free income of £31,553 a year (assum
