Friday Highlight  

What are the risks and rewards of VCT investing?

  • Diversify their Isa by adding some unquoted equity;
  • Gain exposure to early-stage companies with high growth potential;
  • Claim upfront income tax relief.

Some risks to bear in mind

It is important to recognise that a VCT Isa is high risk and inherently different from other types of Isa, such as stocks and shares Isas, Innovative Finance Isas and cash Isas.

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As with any VCT investment, clients need to be comfortable with the investment risks.

VCTs invest in smaller, less established companies which will not be suitable for all investors. VCTs are considered high risk, and clients may not get back the full amount they invest.

The value of a VCT investment, and any income from it, can fall as well as rise.

Investors should also be aware that the share prices of VCTs can fluctuate more than other companies listed on the London Stock Exchange’s main market. They can also be harder to sell.

Tax treatment depends on individual circumstances, and tax rules could change in the future.

Tax reliefs also depend on the VCT maintaining its VCT-qualifying status.

Paul Latham is managing director of Octopus Investments