Whilst it is not widely known, it is possible to utilise Individual Savings Account (ISA) funds to invest in a Venture Capital Trust (VCT) investment.

Venture Capital Trusts (VCTs) are investment companies that are listed on the London Stock Exchange and are set up to invest in small UK businesses that meet certain criteria. To encourage support for these businesses the Government offers generous tax benefits for VCT investing. This also reflects the higher risk nature of the companies they invest in.

Venture Capital Trusts invest in small or early-phase businesses that are either unquoted or listed on AIM (the London Stock Exchange’s market for growth companies). These businesses need investment in order to develop. These investments can potentially give a high return but they can also be much riskier than investing in larger, more established companies.

However, you might still want to be able to take advantage of the potential capital growth prospects as part of your investment diversification strategy and benefit from the tax breaks available when you invest in a VCT. In this case, you may want to learn how you can utilise spare cash or use existing ISA investments to facilitate this.

You can transfer a portion of your existing ISA investments or do a new ISA by investing in a  VCT ISA. This will allow you to claim 30% income tax relief, while retaining your ISA wrapper. This could mean a £30,000 ISA transfer would allow you to claim £9,000 in income tax relief.

To undertake such an investment, you would need to accept that a VCT would be a relatively greater risk than the existing ISA investments and you should therefore always receive advice as to its suitability for you.

If you would like to find out more about this, or want to discuss the issues which this article has raised, please contact your Dentons Wealth Independent Financial Adviser.

This article does not constitute financial advice and is for information only.

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