The Venture Capital Trust Association (VCTA) has published a new policy paper urging HM Treasury to implement two key reforms to the Venture Capital Trust (VCT) scheme, namely increasing the investment limits and extending the age limits, each of which comes at nominal or no additional cost to the Exchequer.
VCTs have played an instrumental role in supporting the UK’s most innovative and high-growth businesses for more than 30 years. VCT funding has been critical to the success of household names such as Zoopla, Secret Escapes and Depop and has backed some of the UK’s newest ‘unicorns’, such as Matillion and Quantexa.
Across the country, the VCT scheme – recently extended by the Chancellor to 2035 – provides vital funding and expertise to thousands of entrepreneurial companies. These businesses support more than 100,000 jobs across the UK, driving essential innovation, productivity, and exports.
However, the VCTA warns that without urgent updates to the scheme’s investment and age limits, its ability to back British success stories to fuel economic growth and innovation will be significantly diminished.
Key recommendations include:
- Raise investment limits: Increase both lifetime and annual investment caps[i] to avoid inflationary erosion and reflect the capital-intensive nature of sectors like life sciences and technology. Without this, based on inflation forecasts[ii], the VCT scheme’s investment power will soon be eroded to half what it was in 2016.
- Extend age limits: Equalise the age limit between Knowledge Intensive companies and other investee companies, making both at least ten years, to better support regional businesses and under-represented founders.
At present, the outdated nature of these rules has real-world implications for VCT-backed businesses. The proposed changes would ensure that the VCT scheme remains fit-for-purpose and continues to back the next generation of British startup successes.
Chris Lewis, Chair of the VCTA, said: “VCTs have consistently proven their value by backing the UK’s most ambitious entrepreneurs. We have a proven model that delivers results, but the scheme must evolve to keep pace with the scale of the opportunity and challenges facing today’s start-ups and entrepreneurs.
“These reforms will unlock capital for the UK’s most promising businesses, in the sectors and regions that will define the UK’s economic future, ensuring that the benefits of their success are felt here at home.”
Richard Stone, Chief Executive of the Association of Investment Companies(AIC), said: “VCTs are a great British success story. They unite capital from private investors with expertise to find and develop ambitious smaller companies. They have helped thousands of businesses, and some have developed into household names.
“The AIC and VCTA are aligned in our call for reforms to make the scheme more effective and allow VCTs to invest more capital in high-growth businesses. This could make a major contribution to the government’s growth agenda without any additional cost to the taxpayer. The industry is united in its call for action, and I hope the Chancellor takes note.”
The full Summer 2025 Policy Paper (including wider policy asks) is available to download on the VCTA website.
