Venture Capital Trusts (VCTs) and Their Role in UK Entrepreneurship
Since their introduction in 1995, Venture Capital Trusts (VCTs) have played a crucial role in supporting entrepreneurship across the UK. These investment vehicles not only offer tax-efficient opportunities for individuals but also provide vital funding to early-stage, innovative businesses.
However, in recent years, VCTs and their portfolios have faced significant challenges. Rising inflation, interest rate increases, and political uncertainty have created a difficult environment for the high-growth companies that rely on VCT backing.
Despite these obstacles, the latest Budget reaffirmed the importance of VCTs in driving economic recovery. The Labour government’s endorsement could mark a turning point for the sector, reinforcing its role in stimulating business growth.
Revitalising VCT Fundraising
The landscape of VCT fundraising has been shaped by shifting macroeconomic conditions and evolving investor priorities.
Investors continue to be attracted to VCTs for their tax advantages, which include up to 30% income tax relief on investments of up to £200,000 per tax year, provided shares are held for at least five years. Additionally, dividends are tax-free, and any capital gains from selling VCT shares are exempt from capital gains tax, making them an appealing option for long-term investment.
