Venture Capital Trusts Secure Unprecedented £1bn Tax Breaks

A record £1 billion in tax relief was claimed on venture capital trusts (VCTs) as investment in these trusts increased and the number of investors grew by a third. The significant increase in tax relief highlights the growing popularity of VCTs as a way for investors to gain tax advantages and support small and medium-sized businesses.

Venture capital trusts (VCTs) are a type of publicly listed investment fund that provide capital to small and medium-sized enterprises (SMEs). In return for investing in these companies, investors receive tax reliefs such as income tax relief of up to 30% and tax-free dividends.

In the tax year 2024/2025, a total of £1.04 billion was claimed in tax relief on VCT investments, marking a substantial increase from the previous year. This surge in tax relief reflects the growing interest in VCTs among investors as a way to support SMEs and also benefit from tax advantages.

The rise in investment and tax relief can be attributed to a number of factors:

• Increased investor demand: The number of investors in VCTs increased by a third, indicating a growing interest in this investment vehicle. Investors are attracted to VCTs due to their tax advantages and potential for high returns.
• Support for SMEs: VCTs provide capital to small and medium-sized businesses, which are often in need of funding to grow and expand. The tax relief on VCT investments encourages investors to support these businesses and contribute to their success.
• Tax advantages: VCT investments offer various tax benefits, including income tax relief of up to 30% on the amount invested. This tax relief incentivizes investors to allocate their funds to VCTs and supports the growth of the sector.

Venture capital trusts have become an attractive investment option for individuals and businesses looking to support SMEs and gain tax advantages. The record £1 billion in tax relief claimed on VCT investments reflects the growing popularity of these trusts as a way to support the growth of small businesses and stimulate economic development.