VCT investment performance.

[Snowbadger]

With the arrival of two divis from the BSC stable this morning, my five year first investment into VCTs is reaching its conclusion. So, how did it go?

Investment :
BSV 30%
BSC 20%
BVT 25%
BMD 25%

Capital return on net investment -1.7%

Dividend yld over 5yrs 70%

Naturally I am pretty happy with the outcome. With an average return of 14% pa I can"t think of a good reason to sell.

Any views?


Cheers,

SB

[Kidman]

With an average return of 14% pa I can"t think of a good reason to sell.
Any views?

You could sell some to invest in new shares so long as you satisfy the six month rule. It would require a bit of planning but either sell well in advance of a new fund-raise in the same VCT, or sell one to top-up one of the other holdings. Ideally perhaps flip-flop between the two of each stable always keeping a few shares so you remain on the register as an existing shareholder thus qualifying for any preferential treatment.

[Artistxman]

Why sell? If capital is not required- why not continue to benefit from the dividends? Am I missing something? Is it about risk reduction? Thank you.

[scotia]

Why sell? If capital is not required- why not continue to benefit from the dividends? Am I missing something? Is it about risk reduction? Thank you.

Why Sell? - you will find that a major component in the gain from a VCT lies in the Initial 30% Tax Rebate - which you retain as long as you hold the investment for over 5 years. So at the end of the 5 years, if you sell the VCT, you can re-invest the sale proceeds in another VCT , and once again claim a 30% Tax Rebate. However as a previous respondent stated, you have to be careful with the 6 month rule, and do not buy a new VCT within 6 months (in both directions) of selling that same VCT, otherwise you lose the tax rebate.

[Artistxman]

Good point, yes gaining another 30% relief is definitely attractive...I see the point about the timing and also the possibility of buying similar quality VCT has to be considered. No where near to face such issues yet...but good points. Thank you.

[Karellan]

One thing about VCT income that is hard to put a value on is its tax invisibility. I have a fair bit of VCT income in relation to pension + interest income and the effect of this is to depress my marginal tax rate. It also helps with having to account for it too , over the years my VCT (and ISA) holdings have reduced the time it takes me to do a tax return substantially.

[james188]

I agree with that view. If you have reached your overall portfolio limit (not the annual limit) in investing in VCTs, it clearly makes sense to recycle and take advantage of the 30% up front relief, assuming that you have sufficient taxable income to shelter. However, if you wish to increase your VCT portfolio and have other available funds, then giving up valuable tax free dividends by selling off existing VCT holdings is a highly questionable. There is no one size fits all answer on this.