With much uncertainty in the industry amid the ever-changing geopolitical tensions, we at Tax-Efficient Investment (TEI) Magazine reached out to a host of industry experts, to find out whether the conflict in the Middle East is having an effect on tax-efficient investing.
Industry voices explore what’s really changed for EIS, SEIS and VCT investors, and why diversification and discipline matter more than ever.
Olivia Wing, Community Development Manager at the EIS Association, said:
“The current geopolitical landscape is adding to broader economic uncertainty, which inevitably can affect growth businesses that raise funding through the EIS, SEIS and VCTs. Rising commodity prices, supply chain pressures and market volatility can create challenges for early-stage companies.
“However, turbulent markets may also present opportunities for innovative and disruptive businesses. Historically, periods of economic and geopolitical uncertainty have often acted as catalysts for innovation, with new technologies and business models emerging as companies adapt to changing conditions and market needs.
“Earlier stage growth businesses are often better able to pivot and adapt to changing market dynamics, customer needs and technological developments than more established incumbents. For investors, this means that while volatility can create short-term challenges, it may also help foster the next generation of high-growth companies.
“Against this backdrop, advisers must carefully assess risk and suitability for each client. Diversification across sectors and stages of business has never been more critical, helping to manage risk while maintaining exposure to potential growth. By taking a measured, long-term approach, IFAs can help clients navigate periods of volatility while continuing to support the next generation of ambitious UK businesses.”
James D’Mello, Commercial Director at Fuel Ventures, said:
“After living through the last five years, Geopolitical instability is nothing new for investing. If anything, the current tensions in the Middle East reinforce exactly why schemes like this exist: to channel capital into the UK’s domestic growth economy, not to bet on global macro events.
“The reality is that most EIS and SEIS-qualifying companies are early-stage UK businesses. They live or die based on their product, team, and their market, not on what’s happening in the Strait of Hormuz. Anyone deciding that Middle East conflict is a reason to avoid backing a UK SaaS company is confusing asset classes.
“Has the risk profile changed? Not meaningfully. These investments were always high-risk, high-reward, and the tax reliefs exist precisely to compensate for that. What has changed is sentiment, and sentiment is usually a terrible reason to sit on your hands when the underlying fundamentals of early-stage UK businesses haven’t shifted.
“The real risk isn’t geopolitics. It’s using geopolitics as an excuse to avoid a conversation they should have had years ago. The opportunity hasn’t shrunk. If anything, valuations are more sensible now than they were three years ago and yet, clients’ tax burdens are only higher.”
Melissa Griffiths, Head of Sales at GrowthInvest, said:
“Despite ongoing geopolitical uncertainty and heightened market volatility, demand for tax-efficient investments has remained strong as the tax year end approaches, particularly across VCT and IHT-focused products.
“The expected reduction in VCT income tax relief to 20% from the 2026/27 tax year has helped sustain robust demand for current fundraises. At the same time, IHT solutions have seen increased interest, as financial planning strategies respond to the planned reduction in inheritance tax relief on AIM investments to an effective 20% from April 2026.
“Looking further ahead, the inclusion of pensions within estates for inheritance tax purposes from April 2027 is expected to reinforce demand for both AIM and unquoted IHT strategies into the next tax year. Liquidity dynamics in the VCT market are also anticipated to strengthen, driven by increased buyback activity as the substantial £1.1 billion raised in the 2021/2022 tax year reaches its five-year maturity threshold, and provides further reinvestment opportunities.
“Tax-efficient investments, when used as part of a long-term financial planning strategy, appear relatively resilient to short-term geopolitical volatility due to the structural benefits of tax reliefs.”
Jonathan Moyes, Head of Investment Research, at Wealth Club, said:
“From a general trading perspective, geopolitical events tend to have a more limited impact on companies backed by SEIS, EIS and VCT investment than on listed markets. These early-stage companies are typically focused on innovation and on disrupting established business models, often by winning market share rather than relying on cyclical demand.
“That said, second‑order effects matter more. The sharp rise in interest rates following the war in Ukraine had a significant impact on venture capital valuations and the availability of follow‑on funding. The venture ecosystem has now had three years to get used to higher interest rates and inflation. Absent a sharp rise in interest rates from here, the impact of an energy price spike is likely to be more limited this time around, although that is clearly not guaranteed.
“While tax‑efficient investments are inherently high risk, the structure of SEIS and EIS can materially reduce potential losses for investors. For instance, an SEIS investor can receive income tax relief of up to 50%, capital gains reinvestment relief of 50% (worth up to 12% of an initial investment), and loss relief (worth up to a further 22.5%).
“If an investor makes full use of these reliefs, the maximum loss if all investments go to zero is 15.5%. For EIS, with 30% income tax relief plus loss relief, the maximum loss is closer to 38.5%. These reliefs do not remove risk entirely, but they do significantly soften the impact if all investments fail.”
Jonathan Keeling, Partner at Haatch, said:
“Our fund runs in line with the tax year end, and as we approach the end of 2025/26, it will be another year of 100% growth for Haatch. We’re not on another planet, though. Geopolitical uncertainty absolutely impacts investing, and anyone saying otherwise isn’t being honest.
“But uncertainty doesn’t mean there aren’t entrepreneurs out there building incredible businesses during a period of technological advancement unseen by our generation. AI alone is reshaping entire industries, and the UK’s early-stage ecosystem is producing genuinely world-class founders.
“It’s an exciting time to be investing early stage in the UK. What has changed is that it matters more than ever to show the value you add to both investors and founders. For fund managers, that means demonstrating real portfolio support, not just capital deployment. For investors using EIS and SEIS, it means backing managers with a clear thesis and a track record of picking winners.”
Mark O’Donnell, Insight Manager MICAP, part of Defaqto, said:
“With the war in Iran only starting on 28th February, it remains unclear how long the conflict will last and its medium- to long-term impacts on global commodities, stock markets, private company valuations and inflation. While time frames and impacts remain unclear, investments across all tax-advantaged solutions are medium to long term and should be expected to be held for five years or longer and considered over that period.
“Such uncertainty can cause investors to delay investment decisions. However, small, often nimble, companies that are typical of those receiving EIS and VCT investments can be the beneficiaries of a changing business landscape. As an example, the current conflict emphasises the importance of energy security, so those offers providing renewable energy or investing in the technology used in the energy process may benefit.
“Dan Atkinson, Head of Technical at Paradigm Norton, summarises a basic investment rule: “Diversification within a strategy or gaining exposure to a wide range of sectors remains as important as it always has.” In addition, diversification can also be sought by varying end customers and their necessity. For example, is the service or product targeting consumers, B2B, or government, and does it focus on core spending or ‘nice-to-have’s?”
Oliver Warren, Assistant Director at Calculus Capital, said:
“Unlike publicly traded stocks, which are subject to daily price fluctuations driven by market sentiment, macroeconomic news (such as the war in Iran), and liquidity flows, VCTs are valued less frequently and based on underlying fundamentals, such as the uptake of a portfolio company’s software or the success of a company’s drug at trial. Thus, resulting in smoother return profiles and reduced sensitivity to public market swings.
“You’re investing in a handpicked portfolio of UK companies where their actual success, as evidenced by their annual accounts, is the main factor in their valuation.
“Private market’s role as a diversifier is grounded in its ability to offer opportunities that public markets may struggle to replicate. Whether it’s the resilience of private portfolios, their alignment with emerging economic trends that are growing fast, or their statistically lower correlations with public assets, private markets stand out as an essential tool for enhancing portfolio construction.
“Additionally, the dividends paid out by VCTs offer a different source of portfolio income to that of traditional fixed income assets. This can help future-proof a client’s portfolio income against rising interest rates introduced to combat inflation, which would otherwise reduce the value of a traditional fixed-income portfolio.”
A spokesperson representing the views of the CISI Financial Planning Forum, said:
“There are indirect effects to consider. Ongoing global tensions can fuel inflation, increase energy costs and create supply chain pressures, all of which can weigh on smaller companies and lead to softer valuations in the short term.
“That said, we would challenge the idea that the risk profile has fundamentally ‘heightened’. These have always been high-risk investments, with the potential for significant volatility and even total loss. What has perhaps increased is investor awareness of risk, rather than the risk itself.
“For experienced investors with the appropriate capacity for loss, these vehicles remain valuable planning tools, particularly given their tax advantages. In fact, periods of uncertainty can sometimes create more disciplined valuations and selective capital allocation, which may improve long-term opportunities.
“The key role of the adviser is to ensure clients fully understand what they are investing in. These are not suitable for the average retail investor, but for the right individuals (those who can tolerate illiquidity and volatility), they can still play a meaningful role within a well-diversified, long-term strategy.”
Andrew Aldridge, Chief Operating Officer at Deepbridge Capital, said:
“The current geopolitical environment, including renewed conflict in the Middle East and heightened global uncertainty, is undoubtedly contributing to volatility across mainstream markets. Yet, for tax‑efficient investments such as EIS, SEIS and VCTs, the impact is more nuanced. In fact, in a world where geopolitical sentiment can turn on a social‑media post and where long‑term diplomacy feels increasingly fragile, growth‑focused UK assets remain fundamentally attractive.
“These schemes often seek to back innovative, scaling UK companies whose performance is not directly correlated with public market swings, making them a compelling option for appropriate investors seeking diversification away from headline‑driven volatility.
“Despite the geopolitical tensions between the US and Iran, adviser and investor appetite for EIS appears resilient as we approach tax year end. Practically, this is unsurprising as those utilising EIS for tax‑planning purposes still have tax liabilities to mitigate, and this structural demand often outweighs short‑term geopolitical noise. The underlying rationale for EIS and SEIS, supporting early‑stage UK innovation while offering powerful, well‑established tax reliefs, remains intact.
“While these investments are, by design, high risk, the current environment does not necessarily heighten that risk in a direct sense. Early‑stage companies always operate in uncertain conditions. However, their fortunes are often driven more by sector dynamics, execution, and innovation than by geopolitical flashpoints. For many investors, the combination of uncorrelated growth potential and valuable tax reliefs continues to justify their place in a diversified portfolio. Perhaps now more than ever.”
Andrew Wolfson, CEO at Pembroke Investment Managers, said:
“Geopolitical uncertainty has always been part of the investment landscape, it is not new, and it is not going away. The more relevant question is whether the underlying case for patient capital remains intact. We believe it does, compellingly so.
VCTs, EIS and SEIS are long-term structures designed to be held through exactly these kinds of periods. The tax reliefs are not incidental, they exist because the government recognises that early-stage UK businesses need committed, long-term capital behind them. That logic is as sound today as it has ever been.
If anything, the current environment reinforces why manager selection matters. At Pembroke, we back founders who combine exceptional commercial instinct with resilient business models and strong unit economics, businesses built to grow through cycles, not just in spite of them. We look for companies solving real problems for real customers. Those businesses do not become less relevant because of events in the Middle East or Washington.
Uncertainty, in our view, is not a reason to hesitate. It is a reason to be more disciplined, more selective and more committed to backing the very best.”
Mei Lim, Group CFO and Managing Partner at Anthemis, said:
“Whilst people might say venture investing is risky, aligning investments with macro trends is a sensible strategy for the long term – given the current circumstances, it looks beyond and protects against the current geopolitical volatility.
“Zooming out, part of the UK government’s broader strategy is to promote investing in emerging technologies, like AI, as well as “defensive” sectors like energy and healthcare. The push to invest in these isn’t going to cease anytime soon, so having allocations in these sectors is a good way to increase exposure and actually might help to mitigate some of the broader investment risk presented by current geopolitical conflict.
“Geopolitical uncertainty, in fact, can be seen to act as more of a tailwind for these types of investments, as there is now a stronger emphasis on domestic economic resilience and self-sufficiency.
“Tech sovereignty has become more important than ever, and capital needs to be deployed into homegrown innovation to keep the talent in the UK. What is going on abroad only drives stronger support for tax-efficient schemes like EIS, SEIS, and VCTs that can channel investment into early-stage and scale-up UK companies across priority sectors.
“If anything, the current geopolitical uncertainty is strengthening venture investments’ relevance, as it has become intrinsically linked to current national priorities supporting domestic investment.”
Us at TEI Magazine would like to thank all of the above for sharing their thoughts. Please note, this commentary is provided for general professional discussion only and does not constitute investment advice or a personal recommendation. Investments of this type carry a high risk, including the potential loss of capital.
