What are the risks with VCTs?

Important considerations and risk warnings

VCTs are more expensive than most types of investment. Initial charges are typically around 5% with annual costs of 2.5%-3.5%. Risk varies between VCTs depending on investment policy.

Most VCT assets will be invested in small UK companies making them higher risk investments.

Although VCTs are listed on the London Stock Exchange (LSE), the volume of shares traded tends to below meaning that bid/offer spreads can be wide. Most VCTs trade at a discount to their underlying net asset value (NAV). There is also no relief for capital losses.

VCTs are highly illiquid. Investors should be aware that it may be difficult, or impossible, to  realise their shares at levels that reflect the value of the underlying assets. VCTs are only suitable for UK resident taxpayers who can tolerate higher risk and who have a time horizon greater than five years.

Nothing in this guide should be regarded as being personalised advice. If you have any doubts as to the suitability of VCTs you should request us to provide you with advice. Levels and bases of taxation can change and the availability of tax reliefs will depend upon individual circumstances. The value of investments and the income from them can fall as well as rise.