Half a billion into VCTs by April?

by | Nov 26, 2014

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VCT investments will attract more than £475 million during the current tax year, a new survey commissioned by Albion Ventures suggests. And almost one in five investors will be a VCT virgin.

The survey shows that 34% of the advisers polled predict increased levels of interest among their clients in VCTs this tax year – a smallish increase on last year’s figure of 31%. Just 3% of the advisers polled expected a fall in support.

The advisers said that 18% of this year’s VCT investors would be doing so for the first time, compared with an estimated 16% last year. On average, the  IFAs believe that the sector will attract over £475 million this tax year, up from £435.8 million during the 2013/14 tax year.

According to Albion’s research, the most frequently cited reason why clients are most likely to invest in VCTs is that they have maximised their ISA and pension contributions; accessing tax-free dividends and the reduced limit of pension contributions are the second and third most popular reasons for investing in a VCT respectively.

But 28% of the respondents believe that VCTs are growing in popularity because IFAs themselves have become more familiar with the sector post-RDR.  That’s nearly three times higher than last year’s score of 10%.


On the whole, advisers say they think that VCTs are already sufficiently attractive in their current form – 57% said that there was no immediate need for further enhancement.  But 36% agreed that the popularity of VCTs would increase further if the annual investment limit was increased from £200,000 to £500,000.

“Advisers are clearly bullish about the prospects for VCTs this tax year,” said Patrick Reeve, Managing Partner of Albion Ventures. But what’s particularly striking is the sharp rise in VCT familiarity among advisers, which strongly suggests that the sector is becoming increasingly mainstream.

“This is reflected in our own experience as we are seeing interest from a wide range of potential investors, many of whom are looking to diversify their portfolio and access a tax-free dividend stream.” Albion is currently launching its Albion VCTs Prospectus Top Up Offers 2014/2015, which are seeking to raise £25.5 million across six venture capital trusts, which it says are targeting a monthly tax-free income of around 6% – equivalent, it says, to approximately 8.5% on the net cost of investment after up-front tax relief at 30%.

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