As the end of the tax year approaches many advisers will be turning their attention to investing in venture capital trusts for their clients.
But as tax rules change, Diana French of Triple Point, said it is becoming more common to invest in VCTs all year round.
The retail strategic director said: “The conversation has changed from ‘what is a VCT?’ to, ‘what’s different about your VCT?’
“VCTs are just going to become more popular with what’s happened to personal tax. A lot of people are looking for tax free income.
“A lot of advisers are tax year end focussed but that is changing, a lot more advisers are doing that stuff at the start of the tax year now instead.”
Investors in VCTs can receive up to 30 per cent income tax relief, along with tax-free dividends.
And changes to tax rules could lead to them becoming more popular.
The capital gains tax annual allowance will fall to £3,000 in April 2024, after it fell to £6,000 last year while dividend tax will fall to £500.
French has worked in the world of VCTs for the past 10 years and said the landscape has changed with more on offer for investors and more people using the trusts as a tool in retirement planning.
She said: “The market has pushed forward so much in the last 10 years there is a lot of choice for investors now.
“It compliments pensions planning, the average age of investors in VCTs are in their mid-50s.”
French added investing in multiple venture capital trusts can be good for diversification.
“If you’ve got a managed portfolio, you’re going to have access to various different assets and VCTs can complement that,” said French.
“It can be your access to small companies, and you’re doing it in a tax efficient wrapper.
“VCTs get grouped together but when you look at them, they are all really different.
“It goes back to what the investor wants, the beauty of VCTs is you can see exactly what is in that VCT and think does this align with stuff that excites me.”
In November, data from Wealth Club showed VCTs had moved on from being saved for one-offs to an integral part of the advice process, with clients increasingly making investments outside the traditional January to March window.
tara.o'connor@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
