Harry Morrison, Investment Analyst & Panel Consultant at MICAP, part of Defaqto, examines VCT fundraising during the 2025/26 tax year. He highlights the gap between total inflows and target raises, and the implications of recent rule changes.
The 2025/26 Venture Capital Trust (VCT) fundraising season offers a revealing snapshot of a market that has seen shifting investor behaviour as a result of major Government policy change announced in the Autumn Budget 2025 reducing the upfront income tax relief from 30% to 20% from 06 April 2026.
Total inflows remained robust in absolute terms compared to the previous fundraising season, with a total of circa £780.2 million raised as at 08 April 2026 across 28 VCTs (some VCTs have joint raises with other VCTs managed by the same investment manager), which is higher than the circa £722.7 million raised as at 02 April 2025 across 29 VCTs during the 2024/25 fundraising season. However, in comparison to target raise amounts, the 2025/26 fundraising season was down compared to the previous season, with 63% raised against the target compared to 72%.
Additionally, it should be noted that of the 28 VCTs that launched in 2025/26, as at 08 April 2026, 19 surpassed their previous year’s fundraising levels, generating an additional £149.5 million compared to the previous fundraise. In contrast, the remaining nine VCTs experienced a decline, raising £91.3 million less than in the previous fundraise.
The main driver of this drop in fundraising across the nine VCTs was the Gresham House VCTs, which fully raised £90 million in April 2025, but only managed a raise of £39.3 million by 08 April 2026, a £50.8 million difference; however, the Gresham House VCTs typically only raise funds every other year, and it opened much later compared to the previous tax-year fundraise. The change in government policy led to the change in fundraising strategy for these two VCTs, giving it a much shorter fundraising window than previously.
Due to the upcoming change in upfront income-tax relief on VCTs it was thought that there might be a sharp spike in inflows during the first three months of 2026 as investors would have been keen to invest in a VCT and still receive the 30% relief. However, there is no clear evidence of a sustained spike in inflows between January and early April 2026 vs prior months, though it should be noted that there was a one-off surge in February.
This February surge appears to be driven by a small number of popular VCT fundraises launching in this period rather than a broad demand across all VCT funds. This suggests a more complex and potentially challenging outlook for the years ahead.
Only a handful of Managers were able to deliver full subscriptions for some or all of their offers throughout the 25/26 tax year, with these Managers being Albion Capital, YFM Private Equity, Foresight Group LLP and Mercia Fund Management.
Albion Capital launched the Albion VCTs in November 2025 and raised £90 million, hitting its full target (it should be noted that all targets discussed in this article include over-allotment facilities) by March 2026.
YFM Private Equity launched the British Smaller Companies VCTs in October 2025 and raised £85 million, hitting its full target by December 2025.
Foresight Group LLP launched the Foresight Enterprise VCT and Foresight VCT in January 2026, raising £40 million for both offers and both closing due to full subscription a month later.
Finally, Mercia Fund Management launched the Northern VCTs in September 2025 and raised £80 million, closing due to full subscription in March 2026 (after extending the raise by an extra £30 million in light of the changes announced in the 2025 budget).
It is unsurprising to see that these results underscore the enduring appeal of well-established VCTs for investors. The 25/26 tax year therefore highlighted a key theme of the current VCT landscape, which is capital tends to flow toward familiar and established names.
Octopus Investments, has typically been a dominant force in VCT fundraising over the last few years, experienced a more nuanced year. While still raising a substantial £92.2 million as at 08 April 2026, across the Octopus Apollo VCT (£77.1 million), Octopus AIM VCTs (£12.5 million) and Octopus Future Generations VCT (£2.6 million), it fell short of its £175 million target across the three VCTs, achieving around 53% total raised in comparison to its total target and all three VCTs still being open for fundraising.
This compares to the previous 24/25 tax year, where the three Octopus VCTs were closed due to full subscription. Additionally, Octopus Titan VCT hasn’t raised for the last two years having last raised £200 million in the 23/24 tax year.
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This data is provided to MICAP by providers and depicts the total amount raised compared to target raise across all 28 VCTs that launched in the 2025/26 tax year, up to 08 April 2026. It should be noted that some VCTs have joint raises with other VCTs managed by the same investment manager. MICAP (which is now part of Defaqto) offers comprehensive platform-based comparisons of tax-advantaged products to support financial advisers making well-informed decisions.
Once the £335 million of inflows raised across the five VCTs that closed due to full subscription have been accounted for, this leaves a remaining figure of £445.2 million shared between 23 VCTs, meaning that just 18% of VCTs that raised in the 25/26 fundraising period, accounted for 43% of total VCT inflows.
This indicates that the market is highly skewed toward a few VCTs and leaves 82% of the VCTs competing for just 57% of the funds, which could lead to some VCTs struggling to raise enough capital to invest efficiently. Time will tell whether VCTs look to differentiate themselves further or make changes to their offers to make them more appealing to investors within the VCT rules.
The question on everybody’s minds now is whether VCTs are still worth it at 20% relief? Alongside the reduction in upfront income tax relief the government also relaxed some of the qualifying conditions for VCT qualifying companies, allowing them to invest into larger companies than before.
These changes increase the gross asset requirement that a company must not exceed from £15 million to £30 million immediately before the issue of shares and £35 million (up from £16 million) immediately after the issue. In addition, the annual investment limit that companies can raise has increased from £5 million to £10 million, or £20 million from £10 million for knowledge-intensive companies.
Lastly, the company’s lifetime investment limit has increased from £12 million to £24 million, or £20 million to £40 million for knowledge intensive companies. While these rule changes enable VCT (and EIS) investments to continue to support growing companies, which in theory should be lower risk investments, though not all VCTs currently target companies of this scale for their portfolio.
In addition, the attractiveness of tax-free dividends remains for VCTs, with many VCTs targeting a 5% dividend. For clients using their VCT portfolio to manage their retirement income efficiently the attraction remains.
Plus, VCTs bring the benefits of venture capital diversification into their portfolio with shorter required holding periods and smaller minimum investment sizes to more institutional / high net worth venture capital funds. Ultimately, VCTs can remain worthwhile at 20%, but the rationale shifts away from upfront tax benefits toward manager quality and the ability to deliver consistent returns over time.
You can read this article and more in ‘Reform, risk and opportunity: the new tax-efficient investment landscape‘, the latest issue of Tax-Efficient Investment (TEI) Magazine!
Harry Morrison
In 2018, Harry joined MICAP as an Investment Analyst and Panel Consultant, where he played a vital role in the development and production of MICAP Reviews. This role also saw him oversee the delivery of the Panel Support Services proposition to clients, ensuring high levels of service and tailored solutions to meet the needs of their panel clients, while delivering comprehensive insights and strategic recommendations to help clients make informed, data-driven decisions.
Following the acquisition of MICAP by Defaqto in 2023, Harry has continued to serve in his capacity as Investment Analyst and Panel Consultant, now as part of the broader Defaqto team. In his current role, he continues to leverage his experience in investment analysis, research and client services to support the wider Defaqto business.
