A cross-party group of MPs has signed an open letter calling for the Chancellor John Healey to reinstate the 30% rate of income tax relief for venture capital trusts (VCTs) in his upcoming Budget.
The rate of VCT income tax relief was cut from 30% to 20% from 6 April 2026 following an announcement in the November 2025 Autumn Budget.
The letter, penned by Conservative MP Alan Mak, claims that VCTs play a central role in funding for Britain’s entrepreneurs.
According to the letter, the last time the rate of relief on VCTs was reduced in 2006/7, VCT funding fell 65% year-on-year.
It says: “They mobilise private savings into innovative UK companies, support entrepreneurs through the difficult scale-up stage, and help firms access the patient capital they need to grow.”
It calls for a restoration of the income tax to relief to 30% to “support regional growth, back British entrepreneurs, and ensure more companies scale here at home.”
Calls to restore the full tax relief for VCTs follow a speech from Alan Mak MP in the House of Commons, during which he claimed that the cut had led to 62% of VCT founders rethinking growth plans, with 25% considering moving abroad.
Modelling from the Venture Capital Trust Association estimates that the latest cut could reduce fundraising by 20-40%.
As well as income tax relief, VCT investors also benefit from tax-free dividends and capital gains tax exemption on eligible schemes held for the mandatory 5 year holding period.
VCTs have benefited from this generous tax treatment since their creation in 1994, in an attempt by the government to boost investment in start-up companies.
In order to be able to receive investment from a VCT, a company needs to have gross assets under a certain threshold both before (£30m) and after (£35m) allotting shares. There are also caps on the amount of VCT funding a company can receive in a year (£10m) and a lifetime limit (£24m). These limits are increased for ‘knowledge-intensive’ companies.