The UK has established itself as a leading market for entrepreneurial small businesses. However, to achieve growth and expansion, these companies often require additional investment.

Understanding that investing in smaller businesses carries more risk than investing in established, larger companies, the government introduced Venture Capital Trusts (VCTs) in 1995. These were designed to encourage investment in innovative British firms. Over the nearly 30 years since their inception, VCTs have played a key role in fostering innovation, job creation, and strengthening the UK economy.

Several businesses that initially benefited from VCT funding have grown significantly, with some going public on the London Stock Exchange, while others have been acquired by global giants such as Microsoft, Amazon, and X (formerly Twitter).

VCTs not only provide investors with access to smaller, unlisted, or AIM-listed companies, but also come with a range of tax benefits. These include up to 30% upfront income tax relief, tax-free dividends, and exemption from capital gains tax on any share value increase. Given the inherent risks involved in smaller businesses, these tax incentives serve to offset the potential losses investors might face.

We believe that VCTs present attractive investment opportunities, especially with the associated tax advantages. However, they aren’t suitable for everyone, so we always recommend consulting with a financial adviser before making any decisions.