Venture Capital Trust (VCT) Scheme

Description

The third of HMRC's venture capital schemes alongside EIS and SEIS, but structured as a fund rather than a direct holding: you buy shares in a listed Venture Capital Trust, which in turn invests in a spread of small, higher-risk trading companies, so you get diversification without picking the companies yourself. Verified October 2026 on gov.uk's own tax relief for investors guidance: the Income Tax relief rate is now 20% on up to £200,000 invested a year — down from 30%, a cut announced at the November 2025 Budget and applying from 6 April 2026, which reduces the maximum annual relief from £60,000 to £40,000. The other two advantages are unchanged and are what often make VCTs worth holding anyway: dividends from a VCT are free of Income Tax, and there's no Capital Gains Tax on any profit when you sell the shares. You must hold the investment for at least 5 years or the Income Tax relief is withdrawn.

Eligibility summary

• Available across the whole UK (England, Scotland, Wales, and Northern Ireland).
• Open to individuals — not restricted to businesses.
• Relevant income bands: higher rate taxpayers, additional rate taxpayers.

Notes

Income Tax relief is only available on newly issued shares, but the tax-free dividend and CGT exemption apply to shares bought second-hand too. Relief can't exceed the Income Tax you actually owe for the year. These are high-risk investments in small unquoted companies — the tax relief is compensation for that risk, not a reason to ignore it.

Applicant type

Individual investor buying newly issued shares in an approved Venture Capital Trust (the relief applies to the investor, not the underlying companies).

Holding period

You must keep the whole investment for at least 5 years or the Income Tax relief is clawed back.