Venture capital trusts
Access attractive tax reliefs as an incentive to take on the risk of backing early-stage businesses
Octopus Investments is the largest provider of Venture Capital Trusts (VCTs) in the market. We launched our first VCT in 2002, and now manage over £1 billion across our range of products.
The UK has a rich ecosystem of early-stage businesses with untapped potential. But without funding and specialist support, many might never get off the ground. Enter VCTs. They channel capital into some of the most promising businesses to help drive their growth.
Some household names started off with VCT funding. You might have heard of some names Octopus has backed, like Secret Escapes, Zoopla, or Graze. Of course, not every smaller company will be a success story. That’s why VCTs are known for their tax reliefs. They exist to incentivise investment and to compensate investors for the risks involved in backing early-stage businesses. Please see risks below
Reasons to invest
Income tax relief
Investors can claim upfront tax relief equal to 30% of their investment on the first £200,000 per annum invested. Dividends and capital gains are also tax-free.
The tax-free dividends paid by a VCT can provide a supplementary income, which could be useful, especially if investors are approaching or in retirement.
Support UK growth businesses
Investing in a VCT means investors are helping innovative smaller companies to create jobs, prosperity and economic growth across the UK.
VCTs can help diversify an investor’s overall portfolio by giving them access to companies they may not otherwise hold.
Risks to bear in mind
Capital at risk
The value of a VCT investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest.
Tax treatment may change
Tax treatment depends on individual circumstances and may change in the future. Tax reliefs depend on the VCT maintaining its qualifying status.
Five-year minimum holding period
Investors need to hold shares for a minimum of five years. If you decide to sell your shares before then, you will be required to repay to HM Revenue & Customs (HMRC) any upfront income tax relief you’ve claimed.
VCTs are a high-risk investment
VCTs invest in smaller companies that are often not listed on the main market of the London Stock Exchange. Investments in smaller companies can fall or rise in value much more sharply than shares in larger, more established companies. They can also be harder to sell.
Learn more about VCTs
A VCT is a listed company that invests in the shares of small, early-stage businesses.
Read our guide to VCTs
Our introductory guide explains how VCTs work, the types of companies they invest in, and the benefits and risks investors need to know.
Watch our video introduction
Familiarise yourself with the basics of VCTs .
Who could benefit from VCTs?
VCTs provide a tax efficient investment opportunity for those looking to invest in the shares of smaller companies.
Clients looking to reduce their income tax bill
Clients looking to extract money from their pension tax efficiently
Landlords looking to make tax-efficient investments
Clients likely to exceed the lifetime pension allowance
Medical professionals looking at alternative ways to invest for retirement
Clients who are additional rate taxpayers
Clients looking to extract money from a business tax efficiently
VCTs from Octopus
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