Venture capital trusts (VCTs) explained for founders (2026/27)

What a VCT is

A venture capital trust is an HMRC-approved investment company that puts money into small unquoted businesses. Individuals buy shares in the VCT, and the VCT spreads that money across several small companies, much like a traditional investment trust.

For a founder, the practical point is that a VCT manager makes the decisions. You pitch a small team that picks companies on behalf of the fund, and the individual shareholders never see your deck.

This is general information, not tax or legal advice. Check HMRC guidance or speak to a qualified adviser before you act on it.

Why investors buy VCT shares

HMRC's manual describes three benefits for individuals who invest up to £200,000: front-end income tax relief on the subscription, tax-exempt dividends on ordinary shares, and no capital gains tax on a sale of the shares.

Investors must be aged 18 or over, subscribe on their own behalf for new ordinary shares, and keep them for at least five years. The VCT itself is exempt from corporation tax on chargeable gains.

The April 2026 change

From 6 April 2026, income tax relief on VCT investments fell from 30% to 20%. HMRC's investor page now lists VCT relief at 20% on up to £200,000 a year, against 50% for SEIS and 30% for EIS.

I would expect that to make some investors think harder before subscribing, though I cannot tell you what it does to any particular fund's fundraising. Ask a VCT manager how their current raise has gone before you assume they have capital to deploy.

Limits that apply to the companies they back

The same Budget changes raised the funding limits that apply to EIS and VCT investments, effective 6 April 2026. The annual limit is £10 million, or £20 million for knowledge-intensive companies. The lifetime limit is £24 million, or £40 million for knowledge-intensive companies.

Gross assets can be up to £30 million before the investment and £35 million after it. These are the old EIS and VCT figures doubled, or close to it, so more scaling companies now qualify. The increases do not apply to certain Northern Ireland companies trading in goods or electricity.

Check the detailed conditions for your own case with HMRC or an adviser. This summary leaves out several rules.

What this means at your stage

VCT money tends to suit companies that have outgrown the SEIS allowance and have revenue or clear traction. If you are at pre-seed with a £250,000 raise, SEIS angels are the obvious route and a VCT manager will probably be early for you.

That is my view from how the limits line up, and I have not seen any official statement on it. Look at each VCT's recent investments to see whether companies like yours get cheques.

Advance assurance and the risk to capital test

HMRC runs advance assurance for SEIS, EIS and VCT. For all three you have to explain how you meet the risk to capital condition, which asks whether the investment carries a risk that the investor loses more capital than they are likely to gain as a net return.

VCT managers deal with these rules every week, so expect them to ask early whether your company qualifies. Having a clear one-page answer saves a round of emails.

How to approach a VCT manager

Treat it like any institutional pitch. Check which stage and sector the fund backs, read its recent investments, and find the person on the team who covers your area.

Ask about the timetable too. A fund that has just closed a large raise has cash to invest, and one that is mid-raise may be slower. A short, specific email that shows you read their portfolio works better than a mass mailing.

Build a list that includes the right funds

Many founders keep VCTs on the list only as a later-stage option and focus on angels first. Whatever your mix, ranking investors by stage, sector and cheque size saves weeks.

InvestorUniverse does that ranking for UK investors, and your top 10 are free.