VCTs as part of a diversified portfolio
May 30, 2017 15:15:06 GMT
solicitorious, eascogo, and 6 more like this
Post by rogerbu on May 30, 2017 15:15:06 GMT
When posters have discussed diversification beyond P2P, I have several times proposed Venture Capital Trusts - sometimes to have my suggestion derided by others.
I have used VCTs as part of my diversified portfolio for nearly 20 years and they have produced regular tax free returns through boom & bust (ie 2008 etc)
However I do understand that they are not simple to understand and hence feel comfortable with.
My practice is
- Buy VCTs up to a maximum of my expected Income Tax for that year divided by 30%.
ie if my income tax is expected to be £6,000, then I will buy VCTs of £20,000.
- Receive a tax refund of £6,000 (£20,000 x 30% = £6,000)
Note - VCTs must be held for 5 years to avoid having to repay the tax refund.
- Receive tax free dividends for 5 years
- Sell after first dividend XD date after 5 years hold period has expired.
- Dividends, Sale Proceeds & Tax Refunds are used to part fund future VCT buys - effectively reinvesting.
Having just sold some VCTs I thought that real numbers would help others understand.
March 2012 - Invested £8,000 in Maven VCTs
June 2013 - Received £2,400 tax rebate.
So I had effectively invested £5,600
2012 - 2017 - received £3440.91 Tax Free Dividends
May 2017 - Sold the VCT shares for £6776.95 after all charges etc
So my return was Dividends £3440.91 + Proceeds of £6776.95 against an investment of £5600 over 5.25 years
This is an annual return of 12.14% after all taxes, charges, fees etc.
Other buy and sell cycles have produced between 10.% & 14%
In my experience VCTs have been much more stable than equities and deserve consideration alongside Equities & P2P.
I hope that helps others
I have used VCTs as part of my diversified portfolio for nearly 20 years and they have produced regular tax free returns through boom & bust (ie 2008 etc)
However I do understand that they are not simple to understand and hence feel comfortable with.
My practice is
- Buy VCTs up to a maximum of my expected Income Tax for that year divided by 30%.
ie if my income tax is expected to be £6,000, then I will buy VCTs of £20,000.
- Receive a tax refund of £6,000 (£20,000 x 30% = £6,000)
Note - VCTs must be held for 5 years to avoid having to repay the tax refund.
- Receive tax free dividends for 5 years
- Sell after first dividend XD date after 5 years hold period has expired.
- Dividends, Sale Proceeds & Tax Refunds are used to part fund future VCT buys - effectively reinvesting.
Having just sold some VCTs I thought that real numbers would help others understand.
March 2012 - Invested £8,000 in Maven VCTs
June 2013 - Received £2,400 tax rebate.
So I had effectively invested £5,600
2012 - 2017 - received £3440.91 Tax Free Dividends
May 2017 - Sold the VCT shares for £6776.95 after all charges etc
So my return was Dividends £3440.91 + Proceeds of £6776.95 against an investment of £5600 over 5.25 years
This is an annual return of 12.14% after all taxes, charges, fees etc.
Other buy and sell cycles have produced between 10.% & 14%
In my experience VCTs have been much more stable than equities and deserve consideration alongside Equities & P2P.
I hope that helps others