What’s Changing for Venture Capital Trusts?
In the Budget, the Chancellor recognised the importance of backing British businesses and the vital role that schemes like Venture Capital Trusts (VCTs) play in helping them start up, scale up and stay in the UK. The announcement of the expansion to VCT and Enterprise Investment Scheme (EIS) investment limits provide a significant boost to the venture capital ecosystem and will also benefit the Alternative Investment Market (AIM) as a significant proportion of larger AIM-listed companies will now be able to receive VCT funding.
One of the most notable adjustments is the reduction in income tax relief on VCT subscriptions from 30% to 20%, effective from 6 April 2026. This marks the first cut in two decades and is expected to influence investor behaviour, with a likely surge in VCT investments before the deadline. While this change reduces the upfront incentive, other measures aim to strengthen support for scaling businesses:
The Budget doubles key eligibility thresholds for VCT and EIS investments, increasing the gross assets limit to £30 million before share issue and £35 million after.
Higher annual and lifetime investment caps - £10 million and £24 million for standard companies, and £20 million and £40 million for knowledge-intensive companies respectively.
These reforms are designed to help businesses grow beyond the start-up phase and attract larger funding rounds. Importantly, the VCT and EIS schemes have been extended until April 2035, providing long-term certainty for investors and entrepreneurs.
Tax-free dividends and capital gains exemptions remain unchanged, preserving two of the most attractive features for VCT investors.
For retail investors, enhanced access to ambitious UK scale-ups comes ahead of a planned reduction in income tax relief from 30% to 20% in April 2026. This presents a huge opportunity for the current tax year, allowing investors to utilise the higher tax relief now and benefit from tax-free dividends.
This article is for general information and does not constitute personal financial advice. If you’re unsure what’s best for you, seek independent financial advice.
Past performance is not a guide to future performance, nor a reliable indicator of future results or performance. The value of investments, and the income or capital entitlement which may derive from them, if any, may go down as well as up and is not guaranteed; therefore investors may not get back the amount originally invested.