VCT Tax Relief To Be Reduced (from 30% to 20%)

Sillychuckie

A doozie from the latest budget... but not one I have seen mentioned much.
Thoguht I'd share.

https://www.gov.uk/government/publications/enterprise-investment-scheme-eis-and-venture-capital-trusts-vct-changes/venture-capital-trusts-enterprise-investment-scheme-investment-limit-increase-and-restructure

• Section 263 ITA 2007 will be amended to reduce the Income Tax relief that can be claimed by an individual investing in VCT to 20% from the current rate of 30%

So much for supporting growth!

singhini

Thanks, i hadn't noticed this. 

What’s improved / expanded

From 6 April 2026, the company-eligibility and investment limits under both EIS and VCT will rise significantly. 

The gross assets test (company size) increases: from £15 million (pre-investment) / £16 million (post-issue) to £30 million / £35 million. 

The annual investment cap for companies goes from £5 million to £10 million (or £20 million for “knowledge-intensive companies” (KICs)). 

The lifetime investment limit doubles: from £12 million to £24 million for standard companies (from £20 million to £40 million for KICs). 

The idea behind the increases: to allow EIS/VCT to support firms beyond the earliest “start-up” phase — i.e. scaling companies that have grown bigger but still need capital to expand. 

The continuation of the schemes has been secured: both EIS and VCT have been extended for a further period (to 2035).

What’s been reduced / disadvantaged (for VCT)

For VCTs only: the up-front income tax relief for individual investors is being cut from 30% down to 20%, effective 6 April 2026. 

That reduction applies only to VCTs — the relief rate for EIS remains at 30%. 

 Implications — what this could mean for investors & companies

The higher company-size and investment limits make EIS/VCT more usable for larger or scaling businesses, not just very early-stage start-ups. That could attract more growth-stage firms seeking capital.

For investors: EIS remains roughly as attractive as before (with 30% relief), though the pool of potential target companies is broader.

For VCT investors: the reduced relief — 20% instead of 30% — weakens the immediate tax benefit of investing via VCT. That could mean less demand for VCTs, unless offset by appealing growth prospects or dividends. Indeed, some in the sector warn the cut could “undermine investor confidence.”

The changes may shift investor preference toward EIS over VCT, especially for those seeking maximum upfront tax relief.

wmb194

Apparently there's now a rush to invest ahead of the reduction in relief:

https://citywire.com/investment-trust-insider/news/wealth-club-sees-vct-black-friday-rush-to-catch-30-tax-incentive/