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Where Taxpayers and Advisers Meet

vct tax relief

Harry the dog
Posts: 1
Joined: Thu Nov 22, 2018 10:45 am

vct tax relief

Postby Harry the dog » Thu Nov 22, 2018 11:12 am

i am running down to retirement over the next couple of years. however i still have about £200,000 that is not in isas or sipps as i recieved an inheritance I was considering putting some money in to a vct. As i understand it i would get 30% tax relief on this and put some money in to a tax shelter for a few years.
my earnings are now about £25,000. I then pay £20,000 in to a pension and get £5000 added to it as tax relief meaning i put the maximum amount in to my pension. Then we come to income tax. my personal tax allowance is £13,000 meaning i pay income tax on £12,000. thats £2,400.
would i be correct in thinking that if i put £8,000 in to a vct i would get a £2,400 tax reduction and cancel out what i had paid. Or would the tax relief paid in to my sipp be took in to account and i would not be able to claim any more tax relief.
many thanks for any answers

D&C
Posts: 61
Joined: Thu Dec 22, 2016 10:04 pm

Re: vct tax relief

Postby D&C » Fri Nov 23, 2018 12:53 am

It is impossible to have a Personal Allowance of £13,000.

I think you are confusing your Personal Allowance with your tax code.

You need to explain what makes up the £13,000 for anyone to know what the tax benefit of paying into a VCT would be.

On the information provided the SIPP contribution doesn't impact your personal income tax position. The SIPP contribution isn't saving you any tax but does get the 25% top up from the pension company when you make the net payment.

I don't believe a VCT payment would affect that however you might want to check VCT doesn't affect the ability to make the SIPP contribution in the first place (unlikely I think).

AdamS93
Posts: 228
Joined: Tue Sep 26, 2017 6:28 pm

Re: vct tax relief

Postby AdamS93 » Fri Nov 23, 2018 9:52 am

VCTs are a risky investment - especially with brexit just around the corner.

In you position, I would definitely see an IFA. Being close to retirement, I dare say you want a fairly liquid investment - to retain the VCT income tax reducer, you have to hold the investment for at least 5 years.

This is an example of you having your tax blinkers on - your ultimate aim should be to realise the greatest gains/income, not reduce tax the most - if you earn £1,000 you pay no tax, but if you earn £100,000 you will pay a lot of tax, but you're still better off. This is obviously an extreme example.

There is a 'Marcus' account with Goldman Sachs which pays 1.5% interest and you can access it at any time. It may be worth looking into this.

Note: I am not a financial adviser but I suggest you go and see one!


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