Are VCTs the answer to lowering your dividend tax tariff?
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Earlier this month, Prime Minister Boris Johnson announced a rise in taxes on dividends by 1.25%. How would that affect investing? According to experts, it’s likely to increase demand for venture capital trusts (VCTs) due to their tax exemption benefits. For an annual allowance of up to £200,000, VCTs can offer you 30% income tax relief. VCT returns, often paid as dividends, are also tax-free. That’s why experts believe they’d present a way for you to reduce taxes, especially if you’re a high earner. Founder of Wealth Club, Alex Davies, comments that VCTs are one of the few remaining options for tax-efficient investing after you’ve put as much as you can in ISAs and pensions. Nick Bird from Octopus Investments shares Davies’ view. He mentioned that VCTs often target a 5% tax-free dividend. That might attract many new investors and lead existing ones to increase their allocations. Bird added that this applies more to bu ...
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