Common Questions

How much did UK VCTs raise in 2025/26?: VCTs raised £917.7m in 2025/26, the third-highest total on record, driven by a deadline rush ahead of the 6 April relief cut to 20%.Source: Wealth Club
What happened to VCT fundraising when the relief was last cut?: When relief was cut from 40% to 30% in 2006/07, annual VCT fundraising collapsed 65% and took sixteen years to recover to pre-cut levels.Source: Wealth Club / Focaldata
Will VCT investors pull out after the 30 to 20 percent relief cut?: A Focaldata survey found 43.5% of current VCT investors plan to invest less and 41.6% plan to stop entirely following the April 2026 cut.Source: Focaldata / Wealth Club
Why was VCT tax relief cut in 2026?: The government reduced VCT relief from 30% to 20% from 6 April 2026 as part of a package that also doubled EIS lifetime limits. HM Treasury frames the change as redirecting capital toward higher-priority growth companies.Source: GOV.UK
What is the difference between a VCT and EIS in 2026?: Both offer income tax relief on qualifying investments. After April 2026 VCTs carry 20% relief via a diversified listed fund; EIS retains 30% relief for direct single-company investments.

Background

The 30% income tax relief that defined VCTs for 30 years was cut to 20% on 6 April 2026, the first reduction since Venture Capital Trusts were introduced by the Conservative government in the Finance Act 1995. The cut arrived alongside EIS reforms and a new British Business Bank direct investment mandate, as part of a package the government projects will unlock approximately £100m of additional annual investment in early-stage UK companies.

VCTs are listed companies that pool retail investor capital and deploy it into portfolios of qualifying small businesses. Investors subscribe for shares in the trust, not the underlying companies, and have historically received three layers of tax advantage: 30% income tax relief on investments up to £200,000 per year (held for at least five years), tax-free dividends, and no capital gains tax on disposal. The relief was introduced to compensate for the higher risk of investing in small, early-stage companies. Major VCT managers include Octopus Investments, Draper Esprit, and Albion Capital.

The 2025/26 tax year ended with a record-breaking £917.7m raised (Wealth Club, third-highest ever), driven by a deadline rush before the 6 April cut. Historical precedent is stark: when relief was cut from 40% to 30% in 2006/07, annual fundraising collapsed 65% and took sixteen years to recover. A Focaldata survey found 43.5% of current VCT investors say they will invest less and 41.6% say they will stop entirely; 91% of founders said their business would be smaller without VCT access. Industry analysis projects a floor of approximately £320m for 2026/27, implying roughly £600m of early-stage capital that simply will not exist at the sub-£2m ticket range where VCTs dominate.

How the World Sees Them

HM Treasury

The government frames the cut as a rebalancing: redirecting incentives toward EIS companies with higher growth potential and doubling EIS lifetime limits to £24m.

VC managers

Top raisers Albion (£90m), British Smaller Companies (£85m), and Octopus Apollo (£82.7m) face a sharply tougher retail fundraise environment from 2026/27.

UK retail investors

Focaldata survey: 43.5% plan to invest less, 41.6% plan to stop entirely — the 10-point cut makes VCTs materially less competitive against ISAs and pensions.

UK startup founders

91% of founders said their business would be smaller without VCT access; the ~£320m projected floor implies roughly £600m of early-stage capital at risk.