How to invest for tax free income and receive upfront 30% tax relief

By investing, say £50,000, into a Venture Capital Trust (VCT) before 6 April, you could reduce your 2014/15 tax bill by £15,000 and gain a potential tax-free income of around £2,500 pa.

An investment into a Venture Capital Trust (VCT) will allow 30% of the gross investment to be offset against your income tax bill in the tax year of investment. It may also have the potential to provide a regular income stream of around 5% pa, which, as the income is tax free, is the equivalent of approximately 7% pa for a higher rate tax payer. All future capital growth is also tax free.

This may be a very useful strategy for higher rate tax payers who are looking to reduce their tax bill for the 2014/15 tax year as any investment made prior to 6thApril 2015 will receive tax relief at 30% for the 2014/15 tax year (presuming there is an income tax liability to offset this against).

You have to be able to tie your money away for 5 years to achieve these tax reliefs, so in many ways VCTs can help complement pensions as a retirement planning tool as long as you are willing to take a higher level of risk with the underlying investments.

This is only a case study and does not constitute advice.  Anyone considering any form of financial planning should seek independent financial advice.

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.

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