"As the government prepares to reduce Venture Capital Trust (VCT) income tax relief from 30% to 20% on 6 April 2026, industry experts are highlighting a strategic recalibration that positions the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) as the primary engines for British innovation. Far from a simple tax grab, the reduction in VCT relief establishes a logical hierarchy of risk and reward."
"For decades, the UK investment landscape lacked a logical risk reward structure. An investor received the same 30% relief against a VCT investment as they did for an EIS investment. This ignored the fact that VCTs are diversified, listed vehicles that act more like private equity funds, whereas EIS involves direct stakes in early stage companies. The new 20% rate for VCTs restores the risk premium. It acknowledges that VCTs are a more mature, lower risk product."
The government will reduce VCT income tax relief from 30% to 20% from 6 April 2026, creating a clearer risk‑reward hierarchy between VCTs and direct startup investments. EIS and SEIS retain higher reliefs (30% and 50%), positioning them to attract high‑risk capital needed for early‑stage scaling. The change recognises VCTs as diversified, listed vehicles with lower risk profiles compared with direct EIS stakes. By widening the incentive gap, capital is expected to migrate toward high‑growth sectors such as AI, life sciences and green energy. VCT investment patterns favour more established, post‑scale companies, driven by liquidity and dividend pressures.
Read at London Business News | Londonlovesbusiness.com
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