Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • dharm999
    • By dharm999 9th Sep 17, 6:02 PM
    • 287Posts
    • 227Thanks
    dharm999
    Investing in VCTs
    • #1
    • 9th Sep 17, 6:02 PM
    Investing in VCTs 9th Sep 17 at 6:02 PM
    I am looking to invest in VCTs, having maxed out pensions and ISAs for both myself and my wife. I've done some reading about them and understand they are high risk, so there is a good chance of losing money. Having looked at a few, one that has performed well recently, is Artemis VCT, and it looks as if I can buy shares in it through my HL account. What confuses he about the Artemis VCT is that others I have looked at have fund raising rounds, so to speak, and then once they raise the amount they are looking for, don't accept any more money. However Artemis is different, in that I can buy shares in it at any time. Is it a genuine VCT and it just operates in a very different way to other VCTs or am I simply misunderstanding it's set up and it isn't a genuine VCT?

    Thanks for your help
Page 1
    • bigadaj
    • By bigadaj 9th Sep 17, 6:54 PM
    • 10,006 Posts
    • 6,404 Thanks
    bigadaj
    • #2
    • 9th Sep 17, 6:54 PM
    • #2
    • 9th Sep 17, 6:54 PM
    You're misunderstanding the operation of vcts, and how the tax relief works.

    They are basically trusts, as described in the name, so hold investment, but given their nature the shares and ownership is of small start ups, unlisted companies or potentially aim shares.

    The vct shares are traded and you can buy them at any time, however you need to subscribe to new shares to get the 30% tax relief, buying in the secondary market won't get you this effective discount. You'll still get cgt relief and dividends will be tax free but they lose a lot of their attraction.

    The tax relief means that they generally trade at a discount, and fees are often high. They are high risk so returns can be very good or terrible,, though as trusts investing in a range of assets they do have some diversification to help with smoothing of returns, just not a lot.
    • dharm999
    • By dharm999 9th Sep 17, 7:17 PM
    • 287 Posts
    • 227 Thanks
    dharm999
    • #3
    • 9th Sep 17, 7:17 PM
    • #3
    • 9th Sep 17, 7:17 PM
    Thanks for the info. I hadn't realised that the tax relief was restricted to the first purchaser, so to get the tax relief I will need to buy new shares. Will need to start looking at new issues then.
    • dividendhero
    • By dividendhero 9th Sep 17, 7:22 PM
    • 96 Posts
    • 69 Thanks
    dividendhero
    • #4
    • 9th Sep 17, 7:22 PM
    • #4
    • 9th Sep 17, 7:22 PM
    I've a couple of VCT's - yes they're high risk. In addition it can be difficult to sell shares as the market is quite thin.

    Having said that, the returns on mine have been good (including Artemis) - I regard them as buy and hold investment and look forward to the tax free dividend stream
    Last edited by dividendhero; 09-09-2017 at 8:14 PM.
    • grey gym sock
    • By grey gym sock 9th Sep 17, 9:06 PM
    • 4,097 Posts
    • 3,570 Thanks
    grey gym sock
    • #5
    • 9th Sep 17, 9:06 PM
    • #5
    • 9th Sep 17, 9:06 PM
    do you already have any unwrapped (i.e. taxable) investments in equities? if not, don't be too quick to rule that out.

    you each have a very generous £11,300 annual capital gains tax allowance for realized capital gains on shares (if you aren't using it for something else); and a moderately generous £2,000 allowance for dividends (or in the current tax year, £5,000, but it will be cut next year). so there is some scope to own some taxable equities and stay within those allowances.

    if you go over those allowance, then the applicable tax rates are still quite low for basic-rate tax payers, a bit higher for higher/additional-rate tax payers. i don't know what tax bands you are in, but if 1 of you is basic-rate, the other higher-rate, it can make sense for the basic-rate tax payer to hold more of the taxable investments.
    • dharm999
    • By dharm999 9th Sep 17, 9:27 PM
    • 287 Posts
    • 227 Thanks
    dharm999
    • #6
    • 9th Sep 17, 9:27 PM
    • #6
    • 9th Sep 17, 9:27 PM
    We both own some shares. Mine are all AIM listed, with large paper losses, c15k, and my wife has Standard Life shares when they demutualised, now worth around £8k, as we reinvest dividends. I am a higher rate tax payer and my wife is a basic rate payer. I am reluctant to invest in more shares, as I realise I don't have the time or expertise to find the right shares. I would prefer to put my money in to low cost trackers, and all our ISAs are in them. The investment in VCTs is to find a home for our excess money. We already invest in P2P, and the plan is to eventually put up to 50k in that. That alongside pensions, ISAs, and cash savings, means we are relatively diversified, and the VCTs are something else to look at. The tax relief is attractive, and I am happy to put the money away for the necessary time.
    • grey gym sock
    • By grey gym sock 9th Sep 17, 9:33 PM
    • 4,097 Posts
    • 3,570 Thanks
    grey gym sock
    • #7
    • 9th Sep 17, 9:33 PM
    • #7
    • 9th Sep 17, 9:33 PM
    it's perfectly sensible to want to avoid putting more in individual shares. you can buy low-cost trackers in a taxable account, too - exactly the same ones you can hold in ISAs.

    VCTs are a bit different, though. could make sense to have a bit in them for diversification, if you like that kind of thing (not something i've gone in for, but opinions differ).
    Last edited by grey gym sock; 09-09-2017 at 9:35 PM.
    • bostonerimus
    • By bostonerimus 9th Sep 17, 9:53 PM
    • 877 Posts
    • 443 Thanks
    bostonerimus
    • #8
    • 9th Sep 17, 9:53 PM
    • #8
    • 9th Sep 17, 9:53 PM
    Why not simply buy tracker funds in a regular taxable account. You have dividend and capital gains tax free allowances........are the risks of VCTs worth it for the tax advantages. Don't buy anything you don't fully understand.
    Misanthrope in search of similar for mutual loathing
    • dharm999
    • By dharm999 9th Sep 17, 10:38 PM
    • 287 Posts
    • 227 Thanks
    dharm999
    • #9
    • 9th Sep 17, 10:38 PM
    • #9
    • 9th Sep 17, 10:38 PM
    Why not simply buy tracker funds in a regular taxable account. You have dividend and capital gains tax free allowances........are the risks of VCTs worth it for the tax advantages. Don't buy anything you don't fully understand.
    Originally posted by bostonerimus
    The tax advantages are a major consideration, and if I decide to invest in an established VCT, I feel I am minimising the risk, as best as I can. Maybe you are right and I should invest in a tracker and use the annual cgt and dividend allowances. It just doesn't feel right, as ridiculous as that sounds. Maybe I have fixated on VCTs and am not thinking this through properly. My other option, for this tax year only, is to use some of my unused pension allowance from 3 tax years ago, and max out my pension, and then look at VCTs next tax year. As you may have worked out, my thinking is all over the place at the moment!
    • bigadaj
    • By bigadaj 9th Sep 17, 11:07 PM
    • 10,006 Posts
    • 6,404 Thanks
    bigadaj
    We both own some shares. Mine are all AIM listed, with large paper losses, c15k, and my wife has Standard Life shares when they demutualised, now worth around £8k, as we reinvest dividends. I am a higher rate tax payer and my wife is a basic rate payer. I am reluctant to invest in more shares, as I realise I don't have the time or expertise to find the right shares. I would prefer to put my money in to low cost trackers, and all our ISAs are in them. The investment in VCTs is to find a home for our excess money. We already invest in P2P, and the plan is to eventually put up to 50k in that. That alongside pensions, ISAs, and cash savings, means we are relatively diversified, and the VCTs are something else to look at. The tax relief is attractive, and I am happy to put the money away for the necessary time.
    Originally posted by dharm999
    There are a number of aim vcts, so investing in those rather than directly in aim shares would give you the comfort of getting 30% tax relief,me end if there are losses.

    Vcts are a slightly different asset class but I'd be putting a few tens of thousands into unwrapped funds/ trusts/ etfs first to benefit from the cgt allowances and the dividend allowance.
    • TheTracker
    • By TheTracker 10th Sep 17, 7:55 AM
    • 1,116 Posts
    • 1,109 Thanks
    TheTracker
    Another option is EIS and SEIS.

    With these and VCT the way I look at it is that the tax relief slightly exceeds the risk of the investment, maybe by a couple of percent, across a mid-term diversified portfolio. Don't get over allured by the headline relief.
    • grey gym sock
    • By grey gym sock 10th Sep 17, 4:08 PM
    • 4,097 Posts
    • 3,570 Thanks
    grey gym sock
    the way i look at VCTs, EIS, and SEIS is: how does the tax relief compare to the very high management charges? you could easily pay about as much (or with SEIS, more) in higher charges (especially compared to cheap tracker funds) as you save in tax.

    now, if you would quite like to have a bit in the underlying investment anyway, but are dubious about the high charges involved, you may feel that the tax relief makes it worthwhile. but if you're not that keen on the underlying investment anyway, it's less convincing. personally, i'd rather pay my money to the UK in tax than to the financial services sector in charges
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

2,227Posts Today

8,292Users online

Martin's Twitter
  • RT @iamemmahill: After watching @MartinSLewis I rang my provider & asked them to recalculate my bill &it has gone from £81 to £51 a month.S?

  • Seriously? How is this supporting Uber... IT'S A POLL! I do em ever day on topical subjects. And I've never promote? https://t.co/JrlxaoNLlY

  • RT @Mum2DDSophie: @MartinSLewis Thanks for your advice! I have easily switched from Extra Energy standard tariff to another supplier and wi?

  • Follow Martin