In this exclusive interview with Tax-Efficient Investment (TEI) Magazine, the VCTA’s Chair Chris Lewis joins us to discuss the state of VCTs following the recent Autumn Budget.
Chris reveals what he thinks is driving the recent increase in VCT interest, referring to the areas where businesses are receiving the most backing. He also outlines the most important changes from the recent Budget, answering whether he expects to see an immediate impact for VCT managers over the next year.
TEI: What do you think is driving the recent increased levels of adviser interest in VCTs?
CL: Advisers are most likely responding to the enduring appeal of tax-efficient investing in a volatile market, combined with the strong track record VCTs have demonstrated in backing high-growth businesses. The returns achieved by VCTs has ensured that their popularity has been increasing for many years.
The recent news that there will be a reduction in the initial tax relief available to VCT investors was unexpected and disappointing. Nonetheless, VCTs continue to be a great way to access a portfolio of high-growth investments, supported by tax free dividends and exemption from capital gains tax.
VCTs will remain a key part of the UK’s tax efficient investment opportunities alongside pensions, ISAs, and EIS. The reduction in initial relief from April 2026 will likely encourage advisers and investors to consider an investment in VCTs as part of the current offers available.
TEI: What sorts of businesses are VCTs backing at the moment, and what does that say about the direction of the market?
CL: If you look at current VCT portfolios, you’ll see that they offer access to innovative technologies that are underpinning the growth of the venture capital market such as AI, data analytics, and fintech.
But it’s not just tech; consumer brands with purpose-driven models and creative ventures are also attracting capital. That mix tells you the market is leaning into innovation and sustainability, with an eye on scalable businesses that can thrive, not just in the UK, but globally. VCTs are a £6 billion plus sector having invested in over 1,000 companies which have created over 100,000 jobs.
TEI: Looking back at the Budget, what were the most important announcements for the VCT and early-stage investment space?
CL: We welcome the increased VCT investment limits, as a reflection of the evolving capital requirements of high-growth businesses, and in recognition of the vital role that VCTs play in driving home-grown innovation and job creation. The increased limits catch up 10 years of inflation that has eroded the scheme’s investment powers.
The VCTA’s Growth Beyond Limits campaign was very successful in this respect. However, this progress risks being overshadowed by the reduction in upfront incentives, which may unintentionally widen the funding gap these reforms aim to close.
TEI: Were there any Budget measures you think will have an immediate impact on advisers or VCT managers over the next year?
CL: The increased investment limits will ensure that the high-potential businesses backed by VCTs can access the growth funding required to accelerate expansion in the UK and internationally. It will also ensure that investors in VCTs can benefit from the success of these businesses through continuing to back their long-term growth.
