VCTs: tax efficient alternatives in uncertain times

Описание: Master Investor's Jonathan Davis and Sarah Lowther talk about why March 2023 was a mega merger month, and why there's so much consolidation in the broking sector and activity in the private equity space.
 
Davis advises those with surplus income and the younger investor to consider venture capital trusts as they 'essentially' give investors tax breaks. "They are very risky," says Davis, "but they do provide a very tax efficient alternative for higher risk, smaller company investment."
 
With predictions of 'more trouble to come' for the UK economy and investment landscape, Davis describes the economy as a head-scratching conundrum with the consumer demonstrating resilience against a backdrop of higher interest rates and energy prices.
 
Jonathan and Sarah also wax lyrical about the state of Royal Mail, and columnist A N Wilson's dark childhood boarding school experiences which contrasted with the light of his father's eccentricity.

Key moments:

00:00 Intro

00:10 The state of the equity markets
Jonathan Davis points out that the markets stabilised in March 2023, as fears of a banking crisis seemed to have subsided to an extent. The situation for brokers remains difficult, though, which is evidenced by some consolidation happening in the broking sector. Overall, Jonathan Davis's outlook on the economy remains rather gloomy.

02:37 The state of the banks
Jonathan Davis considers the sharp rise of interest rates a problem for many banks as investors are beginning to move their money out of banks to get higher yields. At the same time, banks are affected by the significant drop in government bond prices, which reduces the value of their assets on the balance sheet.

06:45 The impact of the budget on freelancers
Jonathan Davis highlights the planned rise in taxes while also stressing that the end of lifetime allowance for pension contributions will be helpful to a number of people. He also points out that ISAs and VCT regimes remain in place.

12:59 VCTs for young investors
Through providing tax breaks when investing in early-stage companies, venture capital trusts (VCTs) are designed to encourage support for new businesses and innovation. VCTs remain particularly attractive for retired people using the tax-free income, or for young high earners looking for a good long-term saving. Jonathan Davis recommends to look at VCTs early in the year. Since VCTs are high risk, he also points out the importance of having a diversified portfolio.

16:34 2023 outlook
Even though the equity markets have fared relatively well, Jonathan Davis sees more trouble to come in 2023. He is sceptical of the strong economy despite the major interest rate and energy price rises, and believes the knock-on effects will become apparent during the remainder of the year.

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