UK investors rush to venture capital trusts ahead of Budget
Two venture capital trusts (VCTs) have raised £90m in just 45 days as investors rush into the vehicles ahead of a potential hike in capital gains tax at the Budget.
Capital gains tax currently sits at 20 per cent but rumours are spreading that the levy could be lifted by Rachel Reeves’s at her first Budget next week.
However, profit from VCTs are exempt from capital gains tax when they are sold and investors can claim 30 per cent income tax relief on VCT investments.
Mobeus, which runs the two VCTs with some £338.5m of assets and a combined portfolio of around 50 companies, said it had been a beneficiary of pre-budget nerves among investors in raising the £90m today.
“Much of the offer’s appeal can be put down to Mobeus’s consistently excellent returns,” said Alex Davies, chief and founder of Wealth Club, an investment servicing firm that helped raise the capital.
“However, the prospect of significant tax rises for wealthier individuals in the coming Budget is also spurring demand more broadly.”
With the new Labour government pledging to leave income tax and VAT untouched, capital gains tax is seen as one of the most likely measures to be targeted for a potential hike next Wednesday.
The Chancellor is said to be drawing up plans to lift the capital gains rate several percentage points to raise several billion for the Treasury’s coffers.
Mobeus’s VCTs recently increased their dividend target to seven per cent of underlying assets. Over the last five years, the VCTs have generated an average return of 71.2 per cent.
Mobeus invests across a range of companies through the trusts, from early-stage firms with less than £500,000 of revenue to later stage businesses.
Companies previously backed by Mobeus include Virgin Wines, Auction Technology Group and MPB.
Wealth Club clients raised £33.6m of the money that went towards the VCTs, Davies added, or over a third of the total cash.