There was mixed news for VCTs. On the positive side, investment limits for qualifying companies are increasing. From 6 April 2026, annual funding caps will double to £10m (or £20m for knowledge-intensive companies), lifetime caps to £24m (£40m), and gross asset thresholds to £30m before and £35m after investment.
This long-overdue change reflects inflation and allows more capital to be deployed, benefiting both VCT providers and growing portfolio companies.
However, this was offset by a key drawback: income tax relief on VCT investments is being reduced from 30% to 20%. The effect of this cut on investor demand remains uncertain.
With only a few weeks before the tax relief reduction takes effect, we’re seeing a surge in interest from investors and advisers. However, it’s too early to know whether fundraising will drop significantly after April.
VCT tax reliefs have been adjusted before, and future fundraising levels will likely influence whether the government views the new rate as appropriate. For now, the assumption is that demand won’t be materially affected, but with another Budget always on the horizon, further changes remain possible.