As seen in the Sunday Times: get VCT tax relief without investing any new money
Archived article: please remember tax and investment rules and circumstances can change over time. This article reflects our views at the time of publication.
You might have read about this in Ian Cowie's column in the Sunday Times yesterday.
It is a little-known option that could prove extremely valuable to experienced investors.
You can invest in a VCT – and qualify for the associated tax reliefs – without investing any new money. Instead, you use money held in existing ISAs. Octopus Titan VCT is the first – and so far the only – VCT to offer this.
How does it work?
- You don’t need to invest new money: you transfer funds from your existing ISAs from previous tax years (2017/18 or earlier)
- The money you transfer is invested in the Octopus Titan VCT and held in the Octopus Titan VCT ISA
- You’re eligible for up to 30% VCT income tax relief on transfers of up to £200,000 – provided you hold the investment for at least five years
- Because your investment is still in an ISA, any growth and income are tax free
- You don’t use this year’s ISA allowance
In practice, suppose you transfer £10,000 from your existing ISA into the Titan VCT ISA, which invests in the Octopus Titan VCT. If this year you have a tax bill of at least £3,000 after other reliefs and allowances, that £3,000 tax bill could reduce to zero, by virtue of your VCT investment. Please note, tax rules can change and tax benefits depend on circumstances.
What do you need to consider?
Firstly, please ensure you’re happy to invest in a VCT. VCTs are generally higher risk and more illiquid than investments typically held in a Stocks & Shares ISA, such as unit trusts or shares listed on the main stock market.
Before transferring you should also check you won’t incur penalties or excessive exit fees. Your ISA will be transferred as cash, so you’ll be out of the market while the transfer takes place and will be unaffected by any ups or downs in the market. The transfer timescale will depend on your existing ISA provider.
About Octopus Titan VCT
Octopus Titan VCT is the largest VCT and, in some respects, one of the most successful.
To date it has a good track record of finding companies that have gone on to be the next big thing. It has already spawned a one billion-pound business in Zoopla Property Group and the manager believes it has several more potential “unicorns” in the portfolio. Our opinion remains that if any VCT is going to invest in the next Facebook, it is likely to be Titan, although past performance is not a guide to the future.
How to apply
The Octopus Titan VCT ISA application is available on our website, alongside the offer documents, which you should read carefully first to ensure you fully understand benefits and risks. Alternatively, simply call 0117 929 0511 to request more information.
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.