Money Made Easy: Five-minute guide to… venture capital trusts

13 january 2013

VENTURE CAPITAL TRUSTS (VCTs) were given a boost last week when the European Commission approved new rules that will allow them to invest in a wider range of companies.

The trusts, which are designed to encourage investment in start-up firms by offering tax breaks to investors, are now “one of the most generous incentive schemes in Europe”, according to the Association of Investment Companies.

What is a VCT?

VCTs are companies that invest in small, higher-risk British firms with assets up to £7m. They offer 30% income tax relief on investments of up to £200,000 a year, as well as tax-free dividends and capital gains.

Their popularity has increased since the maximum annual allowance for tax-free pension contributions was cut from £255,000 to £50,000 in April last year.