Venture Capital Trusts (VCTs)
See the latest VCT new issues and keep tabs on future offers as they become available.
What are Venture Capital Trusts (VCTs)?
Venture Capital Trusts are publicly listed investment trusts, run by a specialist fund manager, which come with attractive tax breaks.
They invest in companies which either aren’t listed on a stock exchange, or are listed on London’s AIM junior stock market, so bring higher risk.
They’re considered to be complex financial instruments, and are most often used by experienced investors who are comfortable with higher levels of risk, have typically used their pension and ISA allowances, and are seeking to reduce their tax liabilities.
Tax benefits of Venture Capital Trusts
VCTs come with a generous tax treatment. They’re free from capital gains tax, dividends are free from income tax, and investors who buy VCTs at their fundraising stage can claim a 30% tax rebate (reducing to 20% from 6 April 2026) by investing up to £200,000 each tax year – reducing their annual income tax bill by up to £60,000.
You’ll need to hold the VCT for at least five years to prevent the tax relief being claimed back, and you can’t reclaim more tax than you’re liable for – so for example if you’ve paid or are liable for £20,000 of income tax in a tax year, that’s the maximum relief you can claim by investing in VCTs.
Qualifying for tax relief
To qualify for the tax breaks, you must buy newly issued VCT shares, which means buying from the VCT manager or a platform when the VCT is fundraising.
VCTs are structured as investment trusts, and so they can be bought and sold on the secondary market, but any such purchases don’t offer the same tax benefits.
It’s important to factor into your calculations any other reductions to your income tax liability, for instance pension contributions and charitable donations, which may reduce the amount you can reclaim via VCTs.
If you invest in VCT new issues through AJ Bell, your information will be passed to the VCT provider and they’ll arrange for a tax certificate to be issued to you, so you can claim the tax relief from HMRC directly.
VCTs and inheritance tax
VCT shares form part of your estate on death, so they’re potentially liable to inheritance tax (IHT). This is in contrast to investing directly in qualifying private companies or certain AIM-quoted shares, which are normally free from inheritance tax if held for at least two years before death.
In practice, it can be difficult to invest directly in private companies, unless you set up and run a business yourself. It’s possible to invest directly in AIM companies, but you wouldn’t get the 30% upfront tax relief offered by VCT investment.
How to invest in VCTs
Before investing in a VCT, you’ll need to open a personal Dealing account with us and complete an appropriateness test, to check your experience and knowledge of complex investment types.
This is because VCTs carry higher risk than investing in more established companies on the stock market, and their low levels of liquidity can make them difficult to sell.
Once complete, you can invest in VCTs through us by selecting your chosen trust. As they have their own specific tax benefits, this impacts the account you can hold these in and how you can buy them.
While you can invest in VCTs through the secondary market in any investment account, we will only accept applications for VCT new issues within a personal Dealing account, as there are no tax advantages in investing through a SIPP or an ISA.
Current and upcoming VCTsVCT
These investments are subject to change and there may be periods where VCTs are not open for new investment. If you have a question about an upcoming VCT new issue, please contact our Dealing Services team on 0345 543 2600.
Frequently asked questions about Venture Capital Trusts
Having the right information is important when making investment decisions. Here are the most frequently asked questions we get about investing in Venture Capital Trusts.
What are the charges for VCTs?
The charges for VCTs can be high relative to other actively managed funds. Typically, annual charges are around 2%, whereas most actively managed funds such as unit trusts or OEICs (Open-Ended Investment Company) will charge 1% or less.
Performance fees are also common for VCTs, whereby the manager takes a slice of the profits if the portfolio does well.
Buying a VCT through a new issue costs £25 per order, with the VCT provider applying an initial charge, though some of this may be discounted if you buy through a platform such as AJ Bell.
VCTs fall under AJ Bell’s shares account charge, which is 0.25% per year, capped at £3.50 per month.
Investors need to assess the charges of any VCTs they’re thinking about buying, and evaluate whether the extra costs are worth it, considering the tax relief alongside the risks and potential rewards of the underlying companies.
What are the risks of Venture Capital Trusts?
Investing in small companies
VCTs invest in small, often private companies, sometimes with unproven business models. Small companies which prosper can deliver exceptional returns, but that can take a long time and is not guaranteed to happen.
Some companies in a VCT portfolio won’t be profitable and could ultimately end up being worthless.
Low liquidity
Investments held in a VCT aren’t usually very liquid, so buying and selling can’t be done at the drop of a hat, or perhaps at the price investors would like.
Subjective valuations
It’s also fair to say that the valuation placed on private companies, which ultimately determines the price of some VCT shares, is more subjective than tradeable stocks, where an active market tells you what price other investors are willing to pay for the shares.
Selling on the secondary market
The VCTs themselves may also not be easy to sell on the secondary market, because most investors prefer to buy newly issued shares, to benefit from tax relief. This may mean that if and when you sell, you might do so at a discount to the underlying value of the VCT, also known as net asset value.
Certain VCT providers offer share buyback schemes, where the VCT manager will buy back shares from investors, and these might offer shareholders a way to exit their VCT holding closer to the net asset value of the underlying portfolio.
How do I get returns from Venture Capital Trusts?
Returns from VCTs can come from:
- Capital growth in the value of the underlying portfolio, stemming from portfolio revaluations as the businesses grow
- Share price rises for investee companies listed on the AIM
- Dividends, which are completely free from UK tax
- Exits where the VCT manager is able to sell on holdings at a profit
VCT managers often use cash raised from exits to pay dividends to shareholders, which can be a welcome source of returns without having to convert shares in the VCT.
How is tax relief handled?
When buying a VCT in the primary market, we’ll ask for your permission to pass your details on to the VCT provider, who will issue you with a tax certificate. Once you have a tax certificate, you’ll have three options for claiming tax relief:
- Submitting a self-assessment tax return
- Contacting HMRC to adjust your PAYE tax code
- Sending your VCT tax certificate to HMRC and requesting a tax refund
We don’t have any involvement in the process, other than passing your details on to the VCT provider, so they can issue you with an investment certificate.
When claiming tax relief, please remember:
- You can’t claim more income tax relief than the amount of income tax you already owe in that tax year
- You can only claim relief on the first £200,000 you invest in a single tax year
- If you sell your VCT shares within five years of the date of issue, you’ll need to contact HMRC and repay any upfront tax relief claimed
How can you transfer VCT share certificates?
If you already hold VCT share certificates and want to transfer them to AJ Bell, it’s free to do so.
Your certificate will need to be in your name and the address on it should match your registered AJ Bell address. If you hold certificates in joint names, you’ll need to transfer to a Joint Dealing account.
From there, you’ll need to complete and send us the following:
- A completed CREST transfer form
- Your original certificate(s)
- A covering letter containing your AJ Bell Dealing account number
Read more about how to transfer investment certificates.
Remember that as these are existing investments you hold, you won’t be able to claim tax relief on these again, once transferred.
We're here to help you invest
We’ve been helping our customers put their money to work for over 30 years. And with over 673,000 customers, that’s a lot of people taking control of their financial futures.
We’re not just one of the UK’s largest and best regarded investment platforms, we’re listed on the FTSE 250, we’re regulated by the Financial Conduct Authority (FCA), oh, and we’re the only investment provider to be Which? Recommended eight years running, 2019-2026.
So, when you're ready to feel good, investing, we're here to help.
