Last year’s Autumn Statement proved positive for the outlook on venture capital trusts, with the chancellor Jeremy Hunt announcing an extension to the the VCT and EIS sunset clause until 2035.

This will ensure that investors in VCTs will continue to remain eligible for income tax relief.

The confirmation of the long-term future of VCTs has reinforced the scheme’s status as a key part of wealth and financial planning, with its strong returns, tax benefits, and ability to complement pensions planning all attractive elements for investors.

VCTs are now a standard fixture in many investor portfolios, and a staple of retirement saving strategies.

Separately, the changes to the annual allowance of capital gains tax and dividend tax that will come into effect in April have further highlighted the role of VCTs as an increasingly viable alternative for retail investors to access significant tax reliefs.

However, given VCTs invest in young, scale-up businesses, they are not risk-free and investors should remember to do their due diligence when selecting a manager.

VCT managers with long small-to-medium enterprise investment experience across multi-sectors and who prioritise investment aftercare in portfolio companies can help minimise some of the risks of investment in VCTs.

These include insufficiently diversified portfolios in terms of both sector and geographic exposure, and managers lacking the resources and expertise to provide strategic and operational advice to management teams as their businesses scale.

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