Important: Venture Capital Trusts (VCTs)
VCTs invest in small, early-stage and unlisted companies and are considered high-risk investments. The value and income from VCTs can rise and fall and you may get back less than you put in. Past performance is not a guide to the future. Tax treatment depends on an individual’s circumstances and can change. Investment decisions should only be made after receiving professional advice. Contact us today to speak to one of our advisers about your investment planning.
A Venture Capital Trust (VCT) is a type of investment designed to encourage people to invest in smaller UK companies. To make this more attractive, the Government offers generous tax reliefs to investors.
VCTs are listed on the London Stock Exchange, so they can be bought and sold like shares. The money raised is then invested mainly in young or growing businesses that are not listed on the main stock market, including private companies and some companies listed on the Alternative Investment Market (AIM).
Venture Capital Trusts offer several benefits, particularly for investors looking to limit their tax liability and diversify their investments.
As Michael Wright, Deputy Chief Executive Officer at Mattioli Woods, explains:
“One of the main attractions of VCTs is the generous tax treatment. You can receive up to 30% Income Tax relief on the amount you invest each tax year, provided the shares are held for at least five years.
“You can invest up to £200,000 per tax year and the tax relief you claim cannot be more than the Income Tax you pay in that year. The tax relief must be claimed for the tax year in which the investment is made.”
In addition, dividends paid by Venture Capital Trusts are free from Income Tax and any profits made when selling the investment are free from Capital Gains Tax.
Beyond tax benefits, VCTs can play a useful role in a diversified wealth management strategy. They invest in smaller, growing companies that are not typically included in traditional portfolios. This offers exposure to a different type of asset class and the potential for long-term growth.
It’s important to understand the risks, as well as the benefits, when considering investing in VCTs:
At Mattioli Woods, our focus is entirely on you. We provide clear, tailored VCT advice that takes into account your wider financial position, tax planning needs and long-term goals. Our advisers help you understand whether VCTs are appropriate for you, select suitable opportunities and integrate them into your overall wealth strategy — all while clearly explaining the risks and potential benefits.
With our combined expertise in wealth management and employee benefits, we aim to give you confidence and peace of mind when making complex investment decisions.
Fund managers raise capital annually in order to invest in UK-based, smaller companies to help them grow and develop. Each VCT invests in a range of businesses at different stages of development, often following a specific theme. The aim is to achieve company growth and pay regular dividends. A typical VCT holds around 60–120 underlying investments.
Due to the nature of VCT investments in smaller UK companies, there’s a higher risk attached of underlying companies failing to grow. However, VCT fund managers specialise in finding early-stage businesses with strong growth potential that may be sold for more than their original purchase price.
VCT fund managers often sit on the board of the underlying companies to provide experience and guidance.
When considering the initial tax benefits, tax-free dividends and tax-free disposals, VCTs certainly have a place as part of a diversified wealth management strategy.
The main qualifying conditions for a VCT company to be eligible for relief are as follows:
A company in which a VCT invests must not have gross assets valued in excess of £15 million and must have fewer than 250 full-time employees.
No, VCTs are not exempt from Inheritance Tax.
Unfortunately, VCTs do not qualify for Business Relief (formerly Business Property Relief). However, Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS) do.
VCTs are not regulated, therefore you should always speak to a financial adviser before considering these products. At Mattioli Woods, we can provide expert advice to help you understand the risks and opportunities.
No. When your Venture Capital Trust pays dividends to you, there is no tax to pay, and you will not have to declare them on your tax return or self-assessment form.
No. If the value of your shares has increased while you have held them, you will not be liable for Capital Gains Tax when you sell them. The growth is tax free.
No, VCTs are not covered by the FSCS. They are considered high-risk investments by the Financial Conduct Authority (FCA).
VCTs and EIS are both UK investment schemes that offer tax incentives, but they differ in how you invest and the risks involved. Venture Capital Trusts are listed companies that hold a diversified portfolio of smaller businesses and can pay dividends. Enterprise Investment Scheme investments are made directly into individual private companies, offering potentially higher growth but higher risk. Tax benefits also differ slightly between the two schemes.
| Feature | VCT | EIS |
| Investment type | Shares in a listed VCT company | Direct investment in qualifying private companies |
| Liquidity | Can be traded on the stock market | Typically harder to sell (illiquid) |
| Tax relief | Up to 30% Income Tax relief (20% for investments made on or after 6 April 2026) | Up to 30% Income Tax relief, plus CGT deferral and IHT advantages |
| Diversification | Diverse portfolio of companies | Usually fewer companies, less diversified |
| Income | Can pay regular dividends | Returns mainly through growth on exit |
| Risk | High but spread across portfolio | Higher, concentrated on fewer companies |
All statements concerning the tax treatment of this investment and its benefits are based on our understanding of current tax law and HM Revenue & Customsʼ practice. Levels and bases of tax relief are subject to change.
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