Budget 2025 - VCT tax relief cut
The Budget has revealed plans to reduce income tax reliefs from 30% to 20% on subscriptions to Venture Capital Trusts.
Jason Hollands, Managing Director of wealth manager Evelyn Partners, comments:
“With any Budget, the devil is in the detail, and buried in the supporting documents of this one 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”.
About Evelyn Partners
Evelyn Partners was created in 2020 through the merger of Tilney and Smith & Williamson. With £64.6 billion of assets under management (as at 30 June 2025), we are one of the largest UK wealth managers ranked by client assets.
Through an extensive network of offices across 23 towns and cities in the UK, as well as the Republic of Ireland and the Channel Islands, we support private clients, family trusts and charities, as well as provide investment solutions to financial intermediaries. Our diverse client base includes entrepreneurs, C-suite executives and partners of professional firms.
Our expertise span both award-winning financial planning and investment management, enabling us to offer clients a truly holistic dual expert wealth management service. Through Bestinvest, we also provide an online investment platform and coaching service for self-directed investors, consistent with our purpose of ‘placing the power of good advice into more hands’.