Record VCT Fundraising and Tax Relief Changes

In the 2025/26 tax year, VCT fundraising in the UK reached a total of £918 million – about 3% more than the £895 million raised in 2024/25, marking the third-highest annual fundraise on record for VCTs

Industry bodies attribute the surge to investors rushing to secure the current 30% income tax relief before it was cut to 20% from 6 April 2026. VCTs channel capital into high-growth, small UK companies. 

In return, investors enjoy generous tax breaks. For example, under current rules an individual can invest up to £200,000 per year in VCT shares and claim Income Tax relief on that amount (now 20%, down from 30%). Dividends received from VCTs are tax-free, and any gain on the sale of VCT shares is exempt from Capital Gains Tax.

Overview of VCT Fundraising in UK

Tax year	VCT funds raised (£m)
2021/22	1,134
2022/23	1,078
2023/24	882
2024/25	895
2025/26	918

Table: Annual VCT fundraising. Data from AIC.

These figures underscore the strength of VCTs in supporting UK start-ups and scale-ups. Since 1995, VCTs have poured over £12 billion into private UK businesses. Notable funds in 2025/26 included Albion VCTs (raising £90m), British Smaller Companies VCTs (£85m) and Octopus Apollo VCT (~£82.7m). Such well-known VCT managers led the market, demonstrating ongoing investor demand. However, the recent tax changes from the Government are likely to alter the landscape in the future.

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What Is a VCT?

A Venture Capital Trust is an HMRC-approved investment company that invests in or lends to unlisted (private) UK businesses. VCTs allow ordinary investors (over age 18) to back early-stage companies with tax incentives. Key features of VCTs include:

• Income Tax relief: 30% (30p per £1) on up to £200,000 invested in a tax year (reducing to 20% from 2026/27).
• Tax-free dividends: Any dividends paid by VCT shares are exempt from income tax.
• CGT exemption: Any capital gain on sale of VCT shares is tax-free (provided qualifying conditions are met).
• Holding period: To keep the 30% relief, shares must be held at least five years. (HMRC guidance confirms profits on VCT shares are tax-free once eligible.)

These tax incentives reflect the high risk of VCT investing. Unlike mutual funds, VCT shares are illiquid and invest in risky ventures. The government uses reliefs to reward that risk: investors lose the tax benefits if the company ceases to qualify or if shares are sold within five years.

Important limits: The annual allowance for VCT Income Tax relief is £200,000 per individual. (Before April 2026, that gave a maximum relief of £60,000 per year; from 2026/27 it will be £40,000 per year.) There is no CGT deferral relief for VCT (unlike EIS), and losses cannot be set against income.

Why the VCT Tax Relief Cut?

At the UK Autumn Budget 2024, the Chancellor announced major changes to the venture capital schemes. From 6 April 2026, upfront income tax relief for VCTs is being cut from 30% to 20%. (The £200k investment limit remains unchanged.) This measure was introduced to “better balance” VCT relief against other schemes and to encourage VCT funds to focus on higher-growth companies. In the same announcements, the Government raised the fundraising and company size limits for VCT/EIS: gross assets cap doubled to £30m, annual fundraise to £10m (£20m for knowledge-intensive), and lifetime investment limits were also increased. The official line is that richer EIS/VCT caps alongside slightly reduced relief will still support entrepreneurship.

Industry reaction has been strongly negative. Trade bodies warn that cutting the relief will deter many retail investors from VCTs. Historically, a similar cut from 40% to 30% relief in 2006/07 saw VCT fundraising collapse by ~65% in one year. That decline took over a decade to recover. Observers fear a repeat: with higher personal tax rates today, losing 10pp of relief significantly raises the effective risk. 

An AIC study noted that the 2025/26 fundraise was “likely a rush by investors to lock in the higher rate before the change.”. If VCT deals are now less attractive, we may see a fundraising drought in 2026/27 and beyond, just as UK SMEs need growth capital.

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What This Means for Investors

• Investors rushed in 2025/26: 

The uptick to £918m confirms many brought forward VCT subscriptions. AIC’s CEO says “a strong year of fundraising… is good news for young UK companies,” but cautions that “this coming year will likely be a different story” given the reduced tax incentive.

• After April 2026: 

New VCT subscriptions from 2026/27 onwards will only attract 20% Income Tax relief. This cut may mean some investors look elsewhere (e.g., EIS, pensions) for tax-efficient growth. It could also squeeze smaller VCT managers more than the big brands.

• Holds and claims: 

Investors must still subscribe by 5 April 2026 to get 30%. Investments from 6 April 2026 forward only get 20%. Claims for relief are made in self-assessment for the year of investment. (See HMRC guidance for timelines and forms.) Crucially, tax relief (both income and CGT relief) is only retained if the VCT remains qualifying and shares are held for 5 years.

• No change to limits: 

The £200k cap per person stays the same, and the requirement to claim relief by 31 January after the tax year end still applies. Those who invest to reduce 2025/26 tax bills should file claims by Jan 2027.

How We Help Startups, Entrepreneurs, Fundraisers, and VCT Investors in UK

At Apex Accountants we specialise in tax-efficient investment planning and advisory. Our searvices relevant to VCT investors include:

• VCT and EIS advisory: We help you understand qualifying criteria, complete relief claims, and integrate VCT/EIS into your tax strategy.
• Tax planning & compliance: Our experts design personalised tax plans (income tax, corporation tax, CGT) to maximise reliefs and stay compliant.
• Investment structuring: We advise on how VCT investing fits your overall portfolio and risk profile and suggest alternatives (e.g., EIS, pensions) where appropriate.
• Fundraising guidance: For entrepreneurs and fund managers, we offer accounting support in raising and managing VCT funds, ensuring adherence to HMRC rules.
• Ongoing support: We prepare tax returns, liaise with HMRC, and keep you updated on legislative changes like the recent relief cut.

Our expert chartered accountants and tax consultants stay abreast of UK tax law. Contact us today for tailored advice on VCTs and other tax-advantaged investments to make sure you’re optimising your position under the new rules.

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FAQs About VCT Fundraising in UK

Should I invest before April 2026?

As per our expert advisers, this investment was a one-time opportunity to get 30% relief while it lasts. If you have the capital, backing a top VCT could now maximise tax savings. But remember the risks of any venture investment, relief or not.

What are the alternatives?

The related Enterprise Investment Scheme (EIS) remains at 30% relief (up to £1m per year). EIS does not give tax-free dividends but offers a lower-risk option (since many EIS firms eventually float). Seed EIS (SEIS) is 50% relief on smaller investments. High earners might consider EIS for larger exposure, but VCTs uniquely offer tax-free dividends.

How do I claim relief on VCT?

You claim VCT Income Tax relief in the Self Assessment tax return for the year you invested (using forms EIS3 or VCT3 provided by the fund). Relief is limited to your tax liability that year. Dividends and capital gains relief are automatic if conditions are met (no separate claim needed). (Speak to your accountant to ensure all conditions – 5-year holding, unquoted status – are satisfied.)

What if I invested before?

If you invested pre-April 2025, your shares may already qualify for disposal relief and tax-free gains if held long enough. Any deferred CGT gains from older investments (pre-2004 VCT deferral rules) have been coming back from 2025/26 onwards, as HMRC guides.

How does VCT investing help the UK economy?

VCTs channel private funds into pioneering companies. Industry experts warn that cutting relief risks starving start-ups of capital. In other words, reduced investor appeal could mean fewer resources for innovation.