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The information in this area of the website is for UK-based financial advisers only.
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Why advisers can’t ignore the growing estate planning advice opportunity
Triple Point explains why the increased need for estate planning strategies should include investments that use Business Relief for inheritance tax exemption.
Some advisers are still cautious about recommending VCTs to their client base. Here, we debunk the five most common myths associated with VCT investing.
In volatile times, VCTs can be a significant investment opportunity
The introduction of US President Donald Trump’s global trade tariffs, the consequences of which are likely to keep playing out in the months and years ahead.
Why diversification is key to a well-rounded VCT investment
VCTs have become a valuable tool for advisers—offering tax benefits, growth potential, and crucial diversification through early-stage company exposure.
Why diversification is key to a well-rounded VCT investment
VCTs have become a valuable tool for advisers—offering tax benefits, growth potential, and crucial diversification through early-stage company exposure.
Raj is a design consultant with his own limited company.
To be tax efficient, Raj pays himself a salary up to the tax-free personal allowance of £12,750, and tops up his income by paying himself an annual dividend of £50,000.
However, he is aware that paying himself through dividends has become less tax-efficient throughout the years.
When the dividend allowance was introduced in 2016, the first £5,000 of dividend income was tax free.
However, the allowance was lowered to £2,000 in the 2018/2019 tax year, and cut again to £1,000 in the 2023/2-24 tax year. In the 2024/2025 tax year, the dividend allowance was halved again, so only the first £500 of dividend income received is free from tax.
Raj’s dividend payment is therefore taxed as follows: He can claim a £500 tax free allowance. The next £37,200 is taxed at 8.75% and the remaining £12,300 is taxed at 33.75%.
This leaves Raj with an income tax bill of £7,406.
It means that withdrawing £62,570 from his limited company annually leaves him with just £55,163 after tax.
POTENTIONAL SOLUTION
Raj discusses his situation with his financial adviser, who talks through the benefits and the risks of investing in a Venture Capital Trust (VCT).
His adviser tells Raj that if he made an investment of £24,687 into a VCT, he would be able to claim 30% income tax relief on his investment, which equates to £7,406, provided Raj holds his VCT shares for the minimum five-year holding period.
VCTs often target a dividend, so Raj can expect to receive an annual tax-free income from his investment.
VCT dividends are completely tax-free and there’s no HMRC requirement for Raj to declare them on his tax returns.
As a result of his investment, Raj effectively wipes out his income tax liability, giving him an annual income of £62,570 plus a tax-free income from the VCT.
This is a hypothetical scenario, provided solely for illustrative purposes. For simplicity, this illustration does not take into account investment growth or charges for the investment. It is based on the current tax rules and personal allowances as at April 2025, which could be subject to change and depend on individual circumstances.
Investor’s capital is at risk. The value of the investment and the rate of return can rise and fall. Tax reliefs also depend on a VCT maintaining its qualifying status. They are also dependent on the individual investor’s circumstances, and tax legislation may change over time.
