Time is ticking before tax incentives are slashed for Venture Capital Schemes
Susannah Streeter, chief investment strategist, Wealth Club: “Time is running out for investors to benefit from tax incentives designed to help the flow of funding into UK start-ups. In four weeks, the income tax relief for investing in Venture Capital Trusts will reduce from 30% to 20%. Many investors will not be aware of this cliff edge and what a difference it could make to their money. The UK sorely needs to harness the innovations in start-up and scale up companies, to help boost growth, especially given the uncertainty facing the global economy right now. But the changes risk reducing vital funding flows for entrepreneurs. Right now, the tax break is worth up to £60,000 if you use the full £200,000 VCT allowance – and the dividends are tax-free. From the new tax year, the maximum saving falls to £40,000 on the same investment. Investors shouldn’t leave it too late. VCTs have limited capacity and many sell out as the tax year end approaches. Most also close ahead of 5 April, so you can’t make a last-minute investment at midnight like you can with an ISA. Anyone hoping to maximise their tax relief and secure the best offers should act sooner rather than later.
Wealth Club’s preferred VCTs for the end of the tax year include the Gresham House VCTs, the Pembroke VCT and the Octopus Apollo VCT.”
Background to tax relief cut
“In November’s Budget, Rachel Reeves said she wanted to make Britain the best place to start and scale a business. There were some positive steps for EIS and VCTs, including changes allowing them to invest in larger and more mature companies as well as early-stage start-ups.
“However, buried in the small print was a significant blow for VCT investors, with the income tax relief due to fall from 30% to 20% from 6 April.
This is a massive kick in the teeth for investors and companies looking to raise money to grow.
A post‑Budget survey conducted by Wealth Club found that from April 2026 the vast majority of investors plan to reduce or stop VCT investment altogether as a result of the changes. According to the firm, 42% of investors said they would stop investing in VCTs entirely, while a further 44% said they would invest less. Just 13% said they would divert those contributions into EIS.
This risks opening up a funding gap of well over £500m for start-ups and scale-ups that rely on VCT backing to grow.
The government says it wants to make Britain the best place to start and scale a business. But this policy risks achieving the opposite by discouraging the very investment that fuels early-stage innovation.
An immediate U‑turn by the government is looking unlikely, but investors can still benefit from the current 30% relief if they get their skates on. In doing so, they can secure more tax relief whilst providing vital funding to help the early‑stage UK businesses which can play an instrumental role in growing the economy.”