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New carry-forward rules could halt VCT surge

Hargreaves Lansdown investment manager Ben Yearsley says the new carry-forward rules on pension contributions could block a surge in sales of venture capital trusts for the next tax year.

From April 6, the annual allowance on pension contributions will be reduced from £255,000 to £50,000. However, new carry-forward rules allow unused contributions of up to £50,000 in the previous three years to be taken into account.

Yearsley says: “That boost to your pension will not be missed, particularly by those who have not put £50,000 into their pension over the last three years who have the opportunity to catch up in the next tax year. It also appears this may be a one-off opportunity to get the 50 per cent tax relief. People may look to make use of it now there is talk of it being scrapped.”

Experts have predicted a surge in investor interest in venture capital trusts and enterprise investment schemes after last week’s Budget unveiled imp-roved terms for both tax-efficient vehicles.

But Yearsley says he would be surprised if VCT sales reached previous highs of £750m in 2004/2005. “I think if VCTs make £200m to £300m each year they will be doing well,” he says.

Albion Ventures managing partner Patrick Reeve says: “I think the tax-free income is still attractive, so a target of £300m-£400m a year in VCTs is not unreasonable.”


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