What tax relief do you get from investing in a Venture Capital Trust (VCT)?

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A Venture Capital Trust (VCT) is a listed company that invests in small, higher-risk UK businesses. The government offers generous tax breaks to encourage this investment, but the risks are real and the rules are strict. The three reliefs for 2026/27 are: 30% income tax relief on the amount subscribed for new VCT shares, up to GBP 200,000 invested per tax year (a maximum GBP 60,000 of relief); tax-free dividends from VCT shares; and no capital gains tax when you sell the shares, however large the gain. Key conditions. The income tax relief only applies to newly issued shares, not shares bought second-hand on the market. You must hold the shares for at least five years - sell earlier and HMRC claws back the relief. Crucially, the relief is non-refundable: it can reduce your income tax bill to zero but not below, so you cannot claim more relief than tax you owe. Worked example: an investor with an income tax liability above GBP 30,000 subscribes GBP 100,000 for new VCT shares. They claim 30% = GBP 30,000 off their income tax bill, and hold for five years to keep it. Any future dividends and any gain on sale are tax-free. Who it affects: typically higher and additional-rate taxpayers who have already used their GBP 20,000 ISA allowance and GBP 60,000 pension annual allowance and want further tax-efficient investment. With the dividend allowance now just GBP 500 and dividend rates raised to 10.75%/35.75%/39.35% for 2026/27, the tax-free VCT dividend is more valuable than before. VCTs are high-risk, illiquid investments and should suit only those comfortable with the possibility of loss - the tax relief does not protect your capital. Take regulated advice. To see how the relief offsets your bill, use an income tax calculator, and a dividend tax calculator to compare the value of tax-free VCT income.

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