"VCTs have been a crucial source of funding for the UK's small and growing companies over the last 30 years. However, UK start-ups should prepare for a funding drought after the government's decision to water down income tax relief. Two fifths of Wealth Club clients expect to invest less in VCTs under the new rules, another two fifths say they won't invest anything at all."
"The last time VCT relief was cut by 10% fund raising fell by 65% year-on-year. The last time VCT income tax relief was set at 20%, way back in 2003/04, the industry raised just £70 million. That compares with nearly £900 million raised in 2024/25. We are seeing a rush of investors looking to get in before the tax rules change, which is likely to drive a race to access the best VCTs before they fill up."
The Budget reduces income tax relief on Venture Capital Trusts from 30% to 20% from April 2026. Wealth Club surveyed 511 high net worth and sophisticated investors, including 474 VCT investors, in the week commencing 01/12/2025. Survey results show 41.6% will stop investing in VCTs and 43.5% will invest less; 96.4% want the government to reconsider; 85.6% expect overall investment in start-ups and scale-ups to decline; only 13% plan to invest more in EIS or SEIS. Wealth Club forecasts a rush to invest before the change and a dramatic fall in VCT investment next tax year.
Read at London Business News | Londonlovesbusiness.com
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