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Tax benefits
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British Smaller Companies VCT combines the unparalleled tax advantages common to all VCTs:

  • 30% upfront income tax relief on investments between £3,000 and £200,000 (provided that the Shares are held for at least five years). *

  • Dividends paid out by British Smaller Companies VCT are free of income tax. In the last five years, tax-free dividends have averaged 3.9 pence per share.

  • Capital gains on disposal of shares in the British Smaller Companies VCT while the Company is structured as a VCT are tax free.

What's the most tax efficient?

VCTs ISAs Pension
Annual limit £200,000 £7,000 Varies with income
Income tax relief? Up to 30% No Up to 40%
Tax free dividends? Yes Yes No
Gains on sale CGT free? Yes Yes N/A
Gains made within the investment free of corporation tax? Yes Yes N/A

Tax reliefs

The following table shows the effect of tax reliefs on a range of investment amounts:

Initial investment £3,000 £25,000 £50,000 £100,000 £200,000
Less income tax relief £900 £7,500 £15,000 £30,000 £60,000
Effective cost to investor £2,100 £17,500 £35,000 £70,000 £140,000

* Depending on the tax position of the individual investor. Investors are recommended to take independent financial advice.

Source: Inland Revenue.