So now we know! After weeks of speculation, Chancellor Reeves has now laid out her full Budget measures to Parliament.
Her ‘smorgasbord’ approach has given industry experts plenty to think about, including those with a particular interest in tax-efficient investments.
Before the budget, it was expected that the appeal of EIS, SEIS and VCTs might be well placed to benefit from changes to pensions and other tax efficient investments. The die is now cast and at least advisers can plan with greater certainty to make sure clients’ portfolios are effectively positioned for growth as well as tax-efficiency. The announced changes to VCTs have generated much reaction from the industry, with mixed reactions but particular disappointment given the cut to up front tax relief.
You can check out all the rest of the budget analysis, news and views on all measures relevant to advisers – including changes to salary sacrifice and cash ISAs – here on our dedicated Autumn Budget category.
Sharing their reaction to today’s budget measures and how they impact the tax-efficient investment sector, experts commented as follows:
Chris Lewis, Chair, Venture Capital Trust Association said:
“We are surprised and disappointed by the government’s decision to reduce upfront income tax relief for the VCT scheme, a change that risks undermining investor confidence at a critical time for UK scale-ups.
“While 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, this progress risks being overshadowed by the reduction in upfront incentives.
“Evidence from a 2023 Kantar survey commissioned by HMRC shows that income tax relief is the single most important motivator for investors, rated ‘very important’ by 86% of VCT investors. The survey found that the ‘number of VCT investors would likely decrease if the tax incentives were to reduce, which was primarily associated with a change to income tax relief’.
“Reducing tax relief at the point of investment may unintentionally widen the funding gap these reforms aim to close by diminishing the VCT scheme’s attractiveness to investors. This could slow near-term fundraising and limit the flow of capital to innovative UK SMEs. Treating the VCT and EIS sister schemes differently in terms of upfront tax relief also introduces additional complexity and could distort investor behaviour, weakening the coherence of the early-stage funding ecosystem.
“We will continue to engage with HM Treasury and officials to ensure these reforms operate as intended and advocate for a balanced, competitive environment for growth-stage investment. The UK’s ambition to lead in scale-up funding depends on maintaining incentives that reflect investor risk appetite and encourage recurring participation.”
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “The VCT scheme invests billions of pounds in up-and-coming UK companies. Cutting upfront tax relief on VCT shares from 30% to 20% undermines the incentive to invest in VCTs. Individuals and advisers will be less willing to support high-risk young companies that will struggle to find funding from other sources. Far from nurturing economic growth as the Chancellor wants, it will cut off vital funding for ambitious, growing companies.
“We welcome the Chancellor’s decision to expand the VCT investment limits and increase the size of companies that VCTs can invest in. But this will all be in vain if VCTs can’t raise funds from investors and advisers.
“Last time the amount of upfront tax relief was cut, from 40% to 30%, the amount of money raised fell by two-thirds, and it did not recover to its previous levels for another 16 years. We urge the Chancellor to reconsider her decision without delay.”
Tom Wilde, partner at Shoosmiths said: “The Government announced some very welcome extensions to the EIS and VCT schemes from 6 April 2026. The amount that an eligible company can raise annually and during its lifetime being significantly increased for both knowledge intensive and non-knowledge intensive companies. There was also an increase in the gross assets limit allowing more scale-up companies to access this funding source.
“Clearly any announcement can’t be all positive so the Government has decided not to take the opportunity to reform the much maligned age requirement under the schemes which disproportionately affects companies outside of the South East. In addition, the rate of tax relief investors can get on investing into VCTs is reduced from 30% to 20% as part of an attempt by the Government to push more individuals to invest under EIS rather than VCT.”
Peter Hicks, research analyst at Chelsea Financial Services, said:
“Rachel Reeves is performing impressive mental gymnastics to badge this as a ‘pro-growth’ Budget, while simultaneously draining the lifeblood from the very companies that drive growth. Widening what VCTs can invest in is welcome, but cutting tax relief to 20% is an appalling blow to a sector that promotes growth and risks reducing the overall funding to smaller UK companies.
“The Treasury expects this change to raise just £125 million by 2027/28 – damaging the growth of the economy for such a paltry sum is utterly nonsensical. Asking investors to take on higher risk while reducing the incentive that makes it worthwhile will only undermine the UK’s long-term growth prospects.”
Sharing his reaction to VCT changes, Trevor Hope, managing director & CIO, Private Equity at Gresham House Ventures, said:
“On balance, we are disappointed by today’s VCT changes. Increasing investment limits and the size of companies that VCTs can invest into is welcome, however the cutting of upfront tax relief is a backwards step. It risks reducing the availability of vital capital for early-stage growth businesses – the very companies we need to drive productivity, innovation, and long-term economic growth.”
Laura Suter, Director of Personal Finance at AJ Bell highlights the opportunity to use VCTs before the tax relief gets chopped, saying:
“VCTs will get less attractive from next April, as the chancellor revealed plans to cut the tax relief on offer with them. Investors who buy VCTs on the primary market can currently claim a 30% tax rebate on investments of up to £200,000 in each tax year. So potentially an investor could reduce their annual income tax bill by up to £60,000. However, this tax relief is being cut to 20% from April.
“These investments aren’t for everyone, they are most often used by experienced, adventurous investors, especially those with large tax bills who have perhaps used up their pension and ISA allowances. But anyone planning to invest in VCTs could consider doing so before April, to lock in the higher tax relief before the rules change at that tax break gets cut.”
Laura’s colleague at AJ Bell, Laith Khalaf, continued with that idea of accelerating investment into VCTs in this tax year saying, that the cut to tax relief could spark a VCT boom. Khalaf comments: “The chancellor has also chosen to restrict tax relief on VCTs, which again won’t help small businesses raise money. VCTs are risky and illiquid, and the 30% upfront tax relief on offer acts as a soothing balm for investors. In the short term the Budget changes could spark a VCT boom, as investors seek to shelter money before tax relief is cut in April, and VCT managers take the opportunity to gather some more assets. But in the longer term the cut to tax relief inevitably dents the appeal of VCTs, and consequently the ability of small businesses to raise money via this route.”
Shane Gallwey, CEO of Guinness Ventures, said: “Expanding these limits strengthens the UK’s venture ecosystem, enabling us to back the most promising growth-stage businesses with the crucial additional capital needed for growth. The forthcoming reduction in VCT income tax relief from 30% to 20% is an unwelcome surprise and underscores the importance for investors to take advantage of the higher relief while it remains available until 5 April 2026.”
On the Chancellor’s pledge to ‘re-engineer’ EIS and VCTs, Mei Lim, Managing Partner, Anthemis, commented:
“A strong early-stage investment market remains essential to the UK’s long-term growth, and today’s Budget’s commitment to re-engineer EIS and VCT, alongside their extension, is a welcome signal that the government recognises that tax-advantaged investment schemes must evolve. But stability alone isn’t enough. Inflation, rising capital needs and longer scaling timelines mean existing eligibility limits must evolve, but R&D tax relief cannot deliver its full value without a faster, more efficient claims process.
“Capital also needs to move smoothly. Persistent HMRC delays continue to slow funding rounds, and ongoing uncertainty around tax, including potential changes affecting carried interest, risks undermining the UK’s competitiveness. With EIS and VCT now secured for the long term, the next step must be reform, from modernising scheme limits and simplifying HMRC processes to providing predictable tax rules so founders and investors have the confidence to build and scale high-growth companies in the UK.”
Peter Steele, Retail Operations Director at Seneca Partners said: “Whilst changes to BPR were kept to a minimum, the announcement that any unused £1 million allowance for the 100% rate of BPR/APR will be transferable between spouses and civil partners will be welcomed. Less so will be the reduction in Income Tax Relief on VCTs to 20%. It will be interesting to see if this results in investors choosing EIS investments instead. Hopefully advisers and their clients will now feel more confident in reviewing their investment strategies to reflect the imposition of IHT on pensions from April 2027 and reduction in BPR on AIM portfolios from April 2026.”
Rob Agnew, Partner & Head of Private Capital, Isio, comments: “The Chancellor has clearly indicated a desire for the UK to become a hub for entrepreneurs and fast-growing firms. However, while the 2025 Budget includes some targeted measures, they appear insufficient to genuinely attract entrepreneurs – particularly when set against the profound impact of previous reforms to capital gains tax and inheritance tax.
“Elsewhere, the Budget has doubled the eligibility thresholds for Enterprise Management Incentives (EMI) and increased the limits for Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) to £10-20m for Knowledge Intensive Companies (KICs). Yet despite these advancements, their attractiveness is diluted by other measures, such as the reduction in income tax relief on VCTs from 30% to 20%.
“For wealth creators and entrepreneurs looking either to pass businesses to heirs or to exit after successful ventures, the cumulative burden of these policies can often outweigh the incentives. Ultimately, the Budget is notable more for what it omits than for what it includes, particularly the absence of substantial reforms to the tax and succession landscape that could meaningfully drive national investment.
“Taken together with recently announced increases in capital-based and property-related taxes, and earlier restrictions on pensions and inheritance, the broader direction of taxation for the wealthy in the UK indicates a continuing trend of targeted tax hikes on wealth creators. For globally mobile individuals, this looks less like an invitation to relocate to the UK and more like a signal that the country is increasingly aiming to fund social and investment priorities by relying more heavily on accumulated wealth and asset-derived income.
“This creates a growing disconnect. The UK continues to offer deep markets, a strong rule of law and public-investment-led growth, yet the tax trajectory for the wealthy remains one-way. This is unlikely to halt – and may indeed reinforce – the trend for entrepreneurs and high-net-worth individuals to diversify their residences and establish alternative bases in other jurisdictions, such as the UAE.”
Jamie Roberts Managing Partner, YFM Equity Partners, said: “The shift in the VCT qualifying rules to include more established business is a real game changer. Regional businesses often scale over a longer timeline and the previous requirement to secure a first VCT-qualifying investment within a fixed window meant too many strong companies missed out on essential early growth capital.
“This change means investors can support high-growth businesses for longer, helping ambitious management teams scale across the UK. It recognises that ambition exists everywhere, and now the investment can too. This kind of policy encourages sustained growth, creates jobs outside the major hubs, and strengthens the ecosystem for entrepreneurs and investors alike.”
Jason Hollands, Managing Director of wealth manager Evelyn Partners, said:
“With any Budget, the devil is in the detail, and buried in the supporting documents is some disappointing news for tax incentivised investing. While the Chancellor has trumpeted measures to support growth companies, including plans to widen the remit of Venture Capital Trusts and Enterprise Investment Schemes so they can invest greater amounts in companies as they scale up, the sting in the tail is that the tax credits for investing in new shares issued by VCTs are to be reduced from 30% to 20%.
“This will materially reduce the incentives for investing in what will remain illiquid and higher risk investments. This is likely to deter many investors from backing these VCTs, especially as they can gain greater income tax relief of up to 45% on mainstream, less risky investments in pensions.
“Changes to tax relief levels on these specialist schemes have a big impact and the Chancellor does not appear to have looked at the history. In 2004/5 VCT tax relief was increased from 20% to 40% and this saw fund raising rocket from a mere £50 million in the prior year to £505 million, followed by £779 million in 2005/6. When it was pared back to 30% in 2006/7, fund raising nosedived to £257 million.
“Widening the amount of cash VCTs can deploy to slightly more mature – but nevertheless still small and illiquid companies – is welcome, but this move frankly should have been accompanied by an increase in the level of tax relief available to investors – rather than a cut – to breathe new life into these schemes and drum up more support British entrepreneurial companies”.
Mia Drennan, CEO of GLAS and EY Entrepreneur of the Year 2025 said: “The UK’s reputation as a global hub for innovation is strengthened by the Government’s latest support for high-growth companies.
“Enhancements to the EMI scheme and increases to EIS limits are positive steps that give investors the flexibility to back businesses as they scale, particularly as companies stay private for longer.
“Liquidity and access to capital are critical to maintaining momentum in the UK’s growth economy. By expanding these schemes and boosting VCT incentives, the Government is helping to channel more investment into the sectors driving our future prosperity.
“These measures signal a welcome, cohesive approach to supporting the companies powering the UK’s economic growth.”
Nishil Patel, Head of Private Client Fundraising at MMC Ventures, said:
“This was a significant budget for EIS and VCTs, for different reasons. Both benefit from increasing investment limits into investee companies, with knowledge intensive qualifying companies now able to raise double, up to £40m! HMRC has taken a very punitive stance on companies approaching or exceeding lifetime allowances in recent times, so it’s positive to see an openness to market feedback.
“Whilst this change widens the investment scope for fund managers, it could raise concerns about dud companies being unnecessarily propped up. So, it’s even more important to understand the strategy and approach of the fund managers you choose to invest with.
The obvious negative for VCTs is the reduction in income tax relief which has been slashed from 30% to 20%! With changes from last year’s budget including IHT removal on pensions, reductions and changes to business relief, EIS is clearly the more favoured scheme of choice by Government and should become a more utilised weapon in a financial planner’s armory!!
More broadly, the announcements reinforce the government’s commitment to making the UK the best place to start and scale a business. For founders, and for the investors who back them, this is a positive signal that strengthens the UK’s position as a global hub for venture-led growth.’
Tim Mills, Managing Partner, ACF Investors, said:
“The decision to raise EIS limits is a significant step in backing British businesses. This is the most immediate and cost-effective way to encourage risk-taking and innovation, and this decision will hopefully supercharge the momentum of successful, ready-to-scale ventures. This decision has given the government the chance to translate its positive rhetoric around entrepreneurship into tangible support for growth.”
Tanya Suarez, CEO, IoT Tribe, said:
“The Government’s AI investment plan announced earlier this week, including a £500m Sovereign AI Unit and another £100m to buy domestic AI hardware, is a strong commitment to the UK’s technology ecosystem. However, we’re seeing more and more UK firms head to the US to seek deeper pools of funding or to be acquired. If the UK is to achieve sustained economic growth, we must find the cash to invest in the technologies in which the UK excels. This is not a niche opportunity but a critical path to growth and key to reinvigorating a UK-wide industrial base.
“It is vital to strengthen our technology sovereignty when national security and supply chain resilience are paramount as well. To reaffirm its commitment to being a world leader in science and technology, the UK must align these public investment commitments with incentives for private investors to support later-stage AI and quantum startups. Although the Chancellor made important changes around the Enterprise Investment Scheme (EIS) and signalled her intent to keep the UK’s most promising scaleups on these shores, we need to see further action to really shift the dial.”
Fred Soneya, Co-founder and General Partner at Haatch, said:
“Increasing EIS caps is noteworthy and should be praised. For over 30 years now, this scheme has been vital in channelling investment into early-stage companies, and by lifting the amount a company can raise through EIS the Chancellor will help ensure that the most promising scaleups – those already approaching their EIS cap – can access more capital to support their long-term growth.
“The new VentureLink initiative is equally positive. Unlocking more private investment into British businesses by utilising capital in pension funds was first outlined under the Tories, but proper mechanisms are required for this to take effect – charging the British Business Bank to consult on the development of VentureLink to enable pension funds to invest in private companies is a wise move by Labour, and one that we should applaud.”
Alex Davies, CEO of Wealth Cub, said:
“In the Budget the Chancellor announced that she would be reforming the UK’s venture capital schemes, allowing the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) to invest more money in more mature businesses. That was straight off the Venture Capital Trust Association wish list. What the Chancellor failed to mention, but was hidden in the Budget documents, was that she would also be cutting the income tax relief available on VCTs from 30% to 20% from April 2026.
We’ve seen the effect of cutting income tax relief on VCT’s before. When VCT income tax relief was cut from 40% to 30% in 2006/07, funds raised by VCTs fell 65% year-on-year.
2026/27 will be no different – with smaller companies facing a drought in funding in the years ahead.
However, it also means that we expect this year to be a bumper one for VCT investment. Investors will likely pile in before the end of year deadline, and popular VCTs will fill up even faster than usual. It really will be a case of “buy now while stocks last.”
While it might not achieve the Chancellors goal of “incentivising funds to seek out higher returns, to ensure they are targeting the highest growth companies”, it will be a great case study in behavioral economics.”
Marriott Harrison’s Head of Tax, John Dunlop, said:
“The proposed reduction in EOT tax relief is a disappointment, especially when the chancellor has clearly listened to business leaders and announced supportive policies, such as the expansion of the EMI scheme and re-engineering the likes of the EIS. EOTs represent a crucial exit strategy for business owners seeking a smooth transition.”
Sam Hields, Partner at OpenOcean, said:
“The government thinks it can tax its way into growth, but this Budget has just set the stage for a shrinking economy. Capital gains increases will put the brakes on founders seeking to grow their firms, and increases to inheritance tax will make them wonder why they bother trying. We’re already haemorrhaging high net worth individuals, and this is bleeding the country dry.
“There are a few small mercies, especially compared to the disastrous smorgasbord of proposals leaked and floated over the last month. The Chancellor wisely abandoned plans to introduce an exit tax, for example, and a targeted review into our tax system, with founders and investors included, is welcome. Lifting the cap on Enterprise Management Incentives (EMI) should also go some way to encouraging the foundation of more small businesses.
“Some crumbs if you’re a start-up, then – but the second you achieve any growth? This government wants to make the pips squeak. One year of these ruinous policies is too long. There needs to be an urgent rethink; otherwise, Rachel Reeves will come to the next Budget and find there aren’t many businesses left to tax.”
Andrew Aldridge, Chief Operating Officer at Deepbridge Capital:
“Expanding EIS and VCTs by allowing knowledge intensive companies to raise up to £40million under these schemes is one of the few genuine growth initiatives announced, giving innovative businesses the greater backing they need to scale. The announced decrease of income tax relief on VCTs from 30% to 20%, is an interesting move and increases the appeal of the Enterprise Investment Scheme which will continue to offer 30% income tax relief. Additionally, the refinement of last year’s announcement of a £1m Business Relief personal allowance, by allowing interspousal transfer, is a practical and overdue fix.
“Beyond that, this was predominantly a political Budget, not an economic one. The tax burden is still climbing, making tax-efficient investments like EIS and Business Relief more vital than ever. Advisers and investors should act now. These aren’t just tax strategies, they’re growth strategies for the UK economy.
Jon Prescott, managing director at PXN Investments, said:
“Today’s Budget brings with it a new layer of tax complexity. While some of the measures make for uncomfortable reading for many clients, they offer advisers a chance to shine and unlock more creative routes to portfolio growth.
“IHT receipts are firmly on an upward trajectory, while the Chancellor has confirmed that the new £1 million 100% business relief (BR) cap is transferable between spouses, creating potential for up to £2 million of fully relieved BR assets per couple. That combination – rising IHT receipts and a clearly defined BR framework – means BR is no longer a niche tool. For the right clients, it’s a mainstream way to plan sensibly for IHT while supporting the UK’s real economy.
“We also welcome the government’s renewed commitment to VCT and EIS. While it’s recognition that tax-efficient vehicles sit firmly within plans to grow the economy, VCT and EIS will also prove useful tools in managing today’s changes. For example, more retail savers will be nudged into markets as a result of the cut to Cash ISAs, opening up opportunities to utilise the two schemes. The cap on the salary sacrifice schemes will also naturally lead advisers to consider complementary tax‑efficient routes for appropriate clients, and the same is true for clients looking to mitigate the tax on capital returns through increased taxes on dividends.”
Chris Riley, Partner, PKF Littlejohn, said:
“Improving access to the Enterprise Management Incentive Scheme for larger companies – likely through increasing the longstanding company size thresholds – is well overdue, and will enable companies to incentivise and retain staff for a longer period through their growth journey.
“Alongside this, the promise to increase access to the Enterprise Investment Scheme (EIS) and Venture Capital Trust Schemes (VCT) for companies deeper into their history is promising news for companies that have previously seen this route to raise new investment cut off due to the age of the company – but we await the full details.”
Mei Lim, Managing Partner atAnthemis, said:
“A strong early-stage investment market remains essential to the UK’s long-term growth, and today’s Budget’s commitment to re-engineer EIS and VCT, alongside their extension, is a welcome signal that the government recognises that tax-advantaged investment schemes must evolve. But stability alone isn’t enough. Inflation, rising capital needs and longer scaling timelines mean existing eligibility limits must evolve, but R&D tax relief cannot deliver its full value without a faster, more efficient claims process.
“Capital also needs to move smoothly. Persistent HMRC delays continue to slow funding rounds, and ongoing uncertainty around tax, including potential changes affecting carried interest, risks undermining the UK’s competitiveness. With EIS and VCT now secured for the long term, the next step must be reform, from modernising scheme limits and simplifying HMRC processes to providing predictable tax rules so founders and investors have the confidence to build and scale high-growth companies in the UK.”
Oliver Bedford, Lead Manager at Hargreave Hale AIM VCT, said:
“We welcome the VCT policy changes announced in the Budget. We expect these changes to bring into scope many exceptional companies that want to invest into innovation and employment but have previously been unable to access funding from VCTs. The UK is brimming with innovation and continues to produce world-class companies. While there is much more to do to improve wider investment into our innovation economy, these changes are further evidence that we are moving in the right direction.
“It is worth noting why the VCT scheme is so effective. By design, the scheme uses tax reliefs to crowd in private sector capital. Since managers must compete for capital, the VCT scheme is inherently set up to focus them on successful outcomes, ensuring that taxpayer funding is deployed judiciously in support of government policy objectives. Good outcomes imply more innovation, more research, more employment and, ultimately, more employee and corporation tax for the Exchequer. It is a virtuous circle.
“We are thrilled that the changes announced will allow us to expand our reach and continue to connect investors with exceptional companies as they turn today’s ideas into tomorrow’s successes.
“Many, not least of all private equity and overseas trade buyers, recognise that UK small companies can offer good long-term growth at attractive prices. We agree and hope that the government’s continued support for the VCT scheme encourages UK investors to allocate capital domestically, allowing companies to recover and putting an end to the constant loss of opportunity to foreign ownership.”
Chris White, Vice President, Business Development at o2h Ventures, said:
“The reduced tax relief offered for VCTs is good news for EIS/SEIS, while the increased annual and lifetime investment limits for both schemes is positive news all round. The companies we invest into via our Knowledge Intensive EIS Fund can now receive £40m in tax-efficient investment, up from £24m, a significant increase. As a specialist biotech investor, the continued Government support for life sciences is welcomed, though we await more granular details of what this entails.”
Hayden Bailey, Head of Private Client and Tax at Boodle Hatfield, said:
“The government are acknowledging that reform is required to encourage talent into the UK and to reinvest in the UK’s entrepreneurial ecosystem. Most tax incentives are currently focussed on the investor, not the entrepreneur themselves, particularly since the effective abolition of Entrepreneurs’ Relief.
Incentives could be designed to encourage people to grow their businesses in the UK and to reinvest the proceeds from those businesses in more activity here. Reform to the tax incentive system needs to be talent-focused rather than investor-focused.”
Beth Dowson, Head of Tax & Share Incentives Scheme at Browne Jacobson, said:
“The decision to review and widen eligibility for VCT and EIS signals a shift in how the government views scale-up investment. Both schemes are powerful levers, but their current criteria can be too narrow to meet the needs of modern, fast-growing businesses. Today’s reforms – including increased investment limits and a reduction in VCT income tax relief – mark a material change to how these incentives operate. The challenge is striking the right balance: widening eligibility expands opportunities for scale-ups, but reduced relief may temper investor demand in the short term.”
Richard Power, Head of Quoted Companies at Octopus Investments, said:
“We welcome some of the changes to the Venture Capital Trust (VCT) rules, which, for example, give AIM VCTs the ability to support UK smaller companies for longer in their growth journey. These reforms mean a larger number of innovative AIM‑listed companies will now be eligible for long-term, scale-up capital. At the same time, it enables businesses like Octopus Investments to back these smaller companies more effectively, and in a way that closely aligns with the UK Government’s growth agenda.
“However, this is coming at the same time as a reduction in the reliefs investors receive across all VCTs, which is likely to slow down the impact on the growth of this market. We’ll be paying close attention to see how this pans out and supporting advisers with the changes from next year.”
