The concept of venture capital trusts (VCTs) is gaining popularity among investors due to their potential tax-savings and attractive returns. Despite their higher risks, VCTs have numerous positive benefits which make them worthwhile investments for those looking to diversify their personal portfolios.

To begin with, VCTs offer investors considerable tax reliefs due to their designation as a “qualifying venture capital investment”. By investing up to £200,000 into a VCT, individuals can qualify for a 30% tax relief. Additionally, the returns generated on VCT investments, such as dividends or capital gains, are free from UK capital gains taxes.

Not only that, VCTs make investments in fledgling companies, often those that may have difficulty obtaining traditional forms of funding. The initial fundings from VCTs allow these start-ups to move forward toward future success. VCTs, as the name suggests, are a venture capital-based instrument, and by using them investors can back up innovative, potentially profitable business ideas. It could be said that VCTs are helping to build the UK economy, as they are assisting with the funding of new business ventures which could lead to job creation in the future.

Finally, VCTs have become popular amongst investors due to their potential return on investment. VCTs have the ability to yield higher returns than traditional investments, due to the higher risk nature of the asset. The returns generated on VCTs are also free from UK income tax and capital gains tax, making them even more attractive.

Overall, VCTs have several positive benefits which have made them an attractive investment option. In addition to their potential to generate higher returns than traditional investments, VCTs also offer generous tax reliefs to investors, along with the opportunity to help fund start-ups and contribute to the UK economic development. Therefore, VCTs certainly should not be overlooked by those looking to diversify their investment options.