With significant tax changes on the horizon, advisers and investors are reassessing the role of tax-efficient investments in portfolio and estate planning.
From 6th April 2026, the rate of upfront income tax relief on VCT investments is set to fall from 30% to 20%. Meanwhile, recent rule changes have expanded the amount that VCTs and EIS-qualifying companies can raise.
Then, looking further ahead, proposals to bring pensions within the scope of inheritance tax from April 2027 are expected to impact the use of EIS, VCT and Business Relief as part of long-term strategies.
In the first part of this series, we asked experts from the tax-efficient investment space to share what they think investors and advisers should be doing in the coming weeks, in relation to EIS/SEIS and VCTs. Later on in this magazine, we’ll also hear from experts on BR and IHT.
Richard Roberts, Head of Sales Development, Foresight Group, said:
“This is a real ‘last orders’ moment for 30% income tax relief on VCTs, so advisers will be encouraging clients to act now. Meanwhile, the larger, more established VCTs are seeing record fundraising, and capacity is being taken up quickly.
“With availability disappearing fast, leaving planning until the 11th hour could mean that clients face a limited choice of offers. Advisers should also work closely with VCT managers to understand the Budget changes to VCT and IHT legislation.”
Susie Harris, Director of Business Development at Parkwalk, said:
“Investors and advisers should consider how Knowledge Intensive (KI) EIS funds can play a central role in tax‑efficient planning. They back research‑rich, IP‑driven companies with strong commercial potential, giving investors exposure to high‑growth innovation as well as tax benefits.
“This is increasingly relevant as pension allowances tighten and VCT income tax relief rates are set to fall. We expect continued strong demand for EIS, particularly KI EIS, as investors seek both tax efficiency and access to the UK’s expanding pipeline of cutting‑edge technologies coming from our UK universities.”
Jason Druker, Chief Commercial Officer at SFC Capital, said:
“As unused pension pots become increasingly factored into IHT planning, more advisers are looking at SEIS and EIS to mitigate the tax burden.”
“SEIS and EIS continue to offer attractive tax breaks, but diversification is essential. Late-year contributions can create operational bottlenecks, with allocations, paperwork, and transfers all requiring lead time. Advisers should remember that both SEIS and EIS permit carry-back of relief to the previous tax year, which can cut the tax bill further.
Kristy Barr, Co-Head of Retail at Octopus Investments, said:
“We suggest advisers look more closely at BR and VCTs, both of which provide the opportunity for investors to help support innovate smaller companies to create job, prosperity and economic growth across the UK.
“It is clear that effective tax planning remains crucial in helping clients navigate an increasingly complex landscape. From making the most of key allowances to exploring specialist tax-efficient investments like VCTs and Business Relief, there are plenty of opportunities to mitigate tax liabilities while driving long-term financial growth.”
Diana French, Chief Commercial Officer – Retail Distribution at Triple Point, said:
“Tax year end is a good prompt to sense-check that clients are making full and appropriate use of the allowances available to them, and that tax planning remains aligned with their objectives, time horizon and risk appetite.
“For investors for whom VCTs are suitable, timing of subscriptions, availability of capacity and pipeline planning are all important considerations for advisers and clients. Looking ahead, the upcoming changes may prompt some clients to revisit their wider estate planning, including whether existing arrangements remain fit for purpose.”
James D’Mello, Head of IFA Distribution at Fuel Ventures, said:
“The key for investors and advisers is to plan early and prioritise properly. VCT and (S)EIS remain highly relevant for the right clients, and I expect SEIS and EIS to remain strong.
“I’m concerned about the proposed reduction in VCT income tax relief, as it will likely reduce demand, particularly amongst the clients who balance the tax relief incentive with allocating meaningful capital to higher-risk growth assets.
“That has a wider knock-on effect. Fewer funds raised means fewer deployments, and ultimately less capital flowing into UK start-ups. It also risks shifting investor appetite away from diversified VCT strategies and back towards more mainstream options, which arguably does nothing for UK innovation or job creation.”
Olivia Wing, Community Development Manager at Enterprise Investment Scheme Association (EISA), said:
“The Government’s continued recognition of the benefits of the EIS has been consistently demonstrated, including the recent announcement in the Autumn Budget to raise the EIS company investment limits.
“This support can help advisers plan with greater confidence. Being aware of the upcoming changes, as well as suitably managing risk and how the schemes can support diversification, are important for investors and advisers as we approach the new tax year.”
Ewan MacKinnon, Partner at Maven, said:
“VCTs and EIS remain compelling opportunities for suitable investors to benefit from generous tax reliefs, and recent changes to the rules governing VCT investments recognise the vital role these vehicles play in supporting early-stage and scaling businesses.
“While the reduction in upfront VCT relief was disappointing, the ability to access tax-free dividends and CGT-free growth remains attractive, and the opportunity remains for investors to maximise relief under current rules.”
Andrew Aldridge, Chief Operating Officer, Deepbridge Capital, said:
“The forthcoming reduction in VCT income tax relief might encourage a ‘fill your boots’ approach to VCTs during the remainder of the 2025/26 tax year. However, it’s important to consider whether EIS should have a more prominent role in portfolios.
“One of the most powerful and often overlooked benefits of EIS is CGT deferral relief, which can defer gains realised in the previous three years and gains arising up to one year after the EIS shares are issued, while inheritance tax considerations further strengthen the case.”
Trevor Hope, CIO, Baronsmead VCTs, said:
“For higher-rate taxpayers with appropriate risk tolerance and time horizon, VCTs can be worth considering as part of a broader plan. The 2025 Budget was largely supportive of the VCT ecosystem, but it also proposed a reduction in upfront VCT income tax relief.
“We think that policy momentum should help sustain a healthier funding runway for scale-ups, and we expect continued demand for well-diversified, actively managed VCT strategies.”
Damon Bonser, CEO of British Design Fund, said:
“We are seeing some investors look to rebalance capital across the early-stagestage taxefficient investment landscape, particularly as VCT and EIS income relief is decoupled. A strengthened position on immediate relief and the continuation of 2023’s doubling of the SEIS annual investor limit to £200,000 is seeing some investors take a closer look at how funds operatingcoupled.
“A strengthened position on immediate relief and the continuation of 2023’s doubling of the SEIS annual investor limit to £200,000 is seeing some investors take a closer look at how funds operating across both SEIS and EIS fit within the evolving landscape.standing government initiative, SEIS may provide a range of potential tax reliefs, but it’s essential that individuals fully understand both the risks and the available reliefs before making any decisions.”
Shane Elliott, Partner at Beringea, said:
“For experienced investors who have fully utilised ISAs and pensions, VCTs and EIS offer significant income tax relief. However, both VCTs and EISs come with higher risk. For clients already considering VCTs as part of a wider strategy, the planned reduction from April 2026 may bring forward decision-making.”
William Horlick, Head of VCT at Molten Ventures, said:
“Investors have an opportunity to combine exposure to innovative technology with valuable tax reliefs, providing not only protection from increased taxation, but also a gateway to sectors shaping the future. VCTs and EIS have historically delivered substantial incentives and have channelled billions into Britain’s most promising tech ventures.”
Nicholas Hyett, Investment Manager at Wealth Club, said:
“The leadup to tax year end is all about VCTs. Upfront income tax relief is set to fall to its lowest level in over 20 years, which we expect will create a rush for the best offers.
“We also expect VCTs’ tax-free dividends to be increasingly attractive over time, but those thinking about backing a particular VCT may want to act sooner rather than later.
“Therefore, it wouldn’t be surprising to see people pulling forward investments previously planned for 2026/27. That could mean EIS and SEIS attract less attention than usual. But EIS in particular looks well set for the years ahead.”
Jonathan Keeling, Partner at Haatch, said:
“The key question for investors and advisers using SEIS and EIS is whether they are planning early enough to do it properly. Timing and tax-year strategy are important, along with selectivity and execution risk.
“One additional dynamic this year is the VCT relief change. We are hearing that this will drive incremental flows into EIS, especially from investors already comfortable with private market risk and looking to preserve tax efficiency.”
Neil Pearson, Tax Specialist and Consultant at Mills & Reeve LLP, said:
“While the upfront tax relief on VCT investments has been reduced, tax-free dividends remain attractive for investors in an environment of rising dividend tax rates and shrinking exemptions.
“History tells us that when effective rates of tax go up, investors will have a greater appetite to save money by seeking out good tax-efficient investment opportunities. So, whilst we may have just got through “Blue Monday”, there are reasons to be cheerful in the world of tax-efficient investing.”
Matthew Brown FCSI, Partner at RAM Capital Partners, said:
“EIS and VCTs continue to play a valuable role for suitable clients, but suitability is critical given the higher risk profile, illiquidity and longer investment horizons involved.
“For VCTs, it will be important to assess whether managers can continue balancing the needs of new and follow-on investments while also maintaining dividend levels and operating effective share buyback facilities. In this environment, investors are likely to prioritise consistency, governance and long-term execution over short-term tax efficiency alone.”
Henry Whorwood, Managing Director, Research & Consultancy at Beauhurst, said:
“With the reduction to the amount of relief investors get on VCT investments, (S)EIS should be in a brighter spotlight this year. Private companies are still suffering from the lack of secondary liquidity, with a record number of companies looking for exit.
“Investors may be better off looking at fund vehicles, rather than direct investing themselves until M&A activity picks up.”
Tom Lindup, COO of Velocity Capital, said:
“The last few years have been demanding for UK early-stage businesses. A positive consequence is that the bar for raising capital has risen. Companies are expected to demonstrate not only a credible route to profitability, but clear, repeatable traction.
“For suitable clients, tax-efficient structures such as EIS can continue to play a valuable role in their investment portfolios and tax planning, combining long-term growth exposure with meaningful tax reliefs within a diversified portfolio.”
Andrew Wolfson, CEO of Pembroke VCT, said:
“The focus should be on securing tax-efficient exposure to long-term UK growth, rather than reacting solely to short-term policy noise. While the 2025 Budget proposed a reduction in VCT income tax relief, this does not alter the core purpose of VCTs.
“The increased per-company investment limits allow VCTs to back successful businesses for longer and deploy more meaningful capital at the point where scale and value creation are clearest, largely a long-overdue inflation catch-up rather than a giveaway.”
Mason Doick, Head of Corporate at JP Jenkins, said:
“Making full use of tax-efficient wrapper is vital if you don’t want to be leaving money on the table when it comes to portfolio management.
“With an estimated £30 billion having been raised through EIS and SEIS over the last 30 years, matched bargain trading provides a much-needed cost-effective solution for management teams to placate investor demands, tidy up the shareholder register and for those who want it, find an exit.”
James Faulkner, Managing Director at Vala, said:
“The last couple of years in early-stage VC has been a battleground, with lots of companies falling by the wayside but lots of great companies finding routes to exit or for founders to take some money off the table or for capital for investment.
“The geopolitical uncertainty has created a scarcity of capital, but we’re also seeing investee companies becoming more capital-efficient. The capital for early-stage high-growth companies is there, but it’s going to take a bit longer for the corporate buyers or institutional investors to get their confidence back.”
This piece featured in the latest issue of Tax-Efficient Investment (TEI) Magazine, which you can read here!
