Black Friday rush into VCTs as flows rise 538% after Budget relief cut

28th November 2025

The amount invested into Venture Capital Trusts (VCTs) through UK's largest VCT broker were up 538% yesterday, versus the average November day last year.

Total VCT applications hit £2 million on the 27th November, the day after the Budget, up from an average £319,700 last year.

Spike comes after plans were announced to cut income tax relief on VCTs from 30% to 20% from April 2026

Alex Davies, CEO and Founder of Wealth Club commented, "The decision to cut VCT relief from 30% to 20% has sparked a Black Friday rush for the top VCT managers, with Wealth Club seeing a 538% rise in VCT applications the day after the budget.

The sudden urgency makes sense. VCTs have limited capacity, and even in normal times top managers often sell out fast. With investors keen to lock in 30% income tax relief before next year, there will be a real "buy it while stocks last" dynamic to the VCT market this year.

We suspect this is just the start of the stampede - and we expect demand to remain high for the rest of the tax year. However, while this year's shelves will be stripped bare, the outlook for next year is less certain.

Back in 2006, the last time tax relief on VCTs was cut by 10%, funds raised fell 65% year-on-year. Only time will tell if investors prove less sensitive this time round."

Three Top VCTs with remaining capacity

Baronsmead VCTs

An analyst once described Baronsmead VCTs as the ready salted crisps of the VCT world - arguably a bit bland, but with nearly universal appeal.

The trusts' portfolio is well diversified, with dedicated teams covering both AIM listed and private companies. The trusts also have nearly a third of their money invested in Gresham House managed mainstream equity funds - an unusually large allocation to a comparatively low risk asset class for a VCT. That diversity should help to mitigate the volatility you see in more concentrated VCTs, though might also reduce the potential for really outsized returns.

The Baronsmead VCTs also have one of the most generous dividend policies in the sector, targeting a yield equal to 7% of NAV a year - and has hit that target for each of the last ten years.

It's not hard to see why these VCTs are perennially popular.

British Smaller Companies VCTs

The British Smaller Companies VCTs target business services companies, which is a pretty deep pond to fish in. The strategy is clearly paying dividends, making BSC and BSC2 the second and third best performing VCTs over five years respectively.

The current crop of investments includes some cracking companies, including financial adviser review platform Unbiased, which is expanding rapidly in the US, and digital special effects studio Outpost VFX, which has worked on projects like Captain America and Rings of Power.

Given the broad sector focus of the VCTs, they often form a core holding for VCT investors – with a strategy that emphasises company selection and portfolio support rather than deep expertise in off the beaten track sectors.

Triple Point Venture VCT

Triple Point was the first VCT out of the blocks this tax year. That seems appropriate, since getting in early is what the Triple Point Venture VCT is all about.

Manager Seb Wallace aims to invest earlier in a company’s corporate life than many VCTs. At this stage there’s less competition, resulting in lower valuations. Investing at an earlier stage is higher risk, but the VCT seeks mitigate that by making lots of smaller bets before doubling down on the winners.

Having launched in 2018 the VCT is now starting to see some of the early bets pay off. It sold credit reference group Credit Kudos to Apple a few years ago for a very healthy 5.2x cost, and other top holdings like energy data company Modo Energy and MRI booking platform Scan.com are showing substantial gains after attracting funding from other investors.

We think the VCT offers investors a distinctive, well thought out approach – with manager who is starting to develop an appealing track record.

About Venture Capital Trusts (VCTs)

Why VCTs are worth investing in

Most investors are initially attracted to VCTs for the tax breaks, and they are generous. Investors can get up to 30% back in income tax relief up front (20% from April 2026), any dividends paid by the VCT are tax free and growth is free of capital gains tax too.

However, VCTs are more than just a tax planning tool. They’re probably the best way for UK investors to access fast growing smaller companies. Revenue growth from VCT investees far outstrips what you see in main market listed companies, and the result has been some attractive returns for investors over the longer term.

Exposure to high growth, smaller companies also has the potential to diversify a conventional portfolio. Long-term performance is often only loosely correlated with the wider economy. Highly disruptive businesses grow by taking market share from incumbents rather than relying on market growth.

The rules governing VCTs mean they’re also an excellent way to back smaller businesses. It’s their role providing support to the next generation of UK start-ups, driving innovation and creating jobs, that earns them the tax relief from the government – and many investors feel that this is something they wish to support too.

Who should consider them?

VCTs are higher risk, and while they’re listed on the stock market, in order to qualify for tax relief investors must hold the shares for at least five years before selling – making them inherently long-term investments. Unlike most conventional funds and shares the minimum amount you can invest is comparatively high – often £3,000 or more. All of this means they are best suited to wealthier or more sophisticated investors.

VCTs are popular with two groups in particular.

The first is higher earners or wealthier investors who are limited in what they can put into more mainstream tax wrappers. Those who already use full £20,000 ISA allowance or whose pension contributions are tapered due to the amount they earn. The £200,000 a year annual VCT allowance is generous and can save higher earners up to £60,000 in upfront income tax (£40,000 from April 2026).

The second group is those in, or near, retirement who use VCTs’ tax free dividends to supplement income from other sources. Because they’re higher risk, VCTs shouldn’t be considered a replacement for a pension, but they can help to top-up income from more conventional sources.

Some other tips?

Seek diversification – VCTs are high risk so spread your investments over multiple managers. Fortunately there’s lots of choice in the market, from trusts with expertise in particular sectors, like Pembroke VCT, to broad generalist funds like the Albion VCTs.

Reinvest and recycle – Get an additional 30% initial income tax relief by reinvesting those tax-free dividends. You can also recycle the proceeds from selling the shares, once they’ve been held for five years, into a new VCT.

Be aware of discounts – VCT shares trade on the stock market, but often at a discount to the underlying value of the fund’s investments. That shouldn’t be a problem for long term investors, who will receive the majority of their return through tax free dividends as well as underlying growth. However, it’s something to be aware of and is another reason these should be treated as long term investments.

Capacity limits - If you see something you like, it can pay to act quickly. VCTs have limited capacity each year and popular offers can quickly reach capacity and close to new investors. Some VCT managers also offer lower fees to investors who invest soon after an offer opens.

Source - Wealth Club, Wealth Club, 20 Richmond Hill, Bristol, BS8 1BA
www.wealthclub.co.uk