With the government’s decision to slash upfront tax relief for VCT investments, many investors and advisers are raising the alarm. According to Canaccord Wealth’s Head of Wealth Planning, David Goodfellow, the move, cutting relief from 30% to 20%, may discourage early-stage investing exactly when UK start-ups need capital most. The reduction risks undermining the appeal of higher-risk funding, constraining innovation and growth, and limiting the chances for promising scale-ups to flourish.
David Goodfellow, head of wealth planning, Canaccord Wealth:
“The reduction in tax relief for VCT investments, from 30% to 20%, is a significant setback for UK start-ups, notwithstanding the increase to the investment and gross asset limits. These schemes exist to encourage investors by offsetting some of the inherent risk, helping innovative businesses secure the early-stage funding they need to grow.
Early investment is critical for start-ups, many of which go on to create jobs and generate substantial returns for the Exchequer through corporation tax and wider economic activity. By prioritising short-term gains, the Treasury risks stifling ambition and constraining the growth of small companies. The modest savings today could cost far more in the long run, as reduced investment slows innovation and undermines the UK’s ability to nurture the businesses of the future.”
