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. Itmay 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.