Backing winners for longer: what could the new VCT limits mean for investors?
When the changes to the Venture Capital Trust (VCT) scheme took effect on 6 April 2026, the reduction of income tax relief from 30% to 20% took up the bulk of investors’ attention, and rightly so.
However, it also brought about another change that may open a new opportunity for investors.
The government relaxed rules around which companies can receive VCT funding and how much they can raise.
By allowing VCTs to continue backing successful companies for longer, the new rules could mean investors can participate in more of the value created by those businesses as they grow.
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More room to invest in VCTs
The changes to the VCT qualifying rules, while attracting relatively little attention, signal the potential for a new opportunity for investors.
They affect investment decisions within VCT portfolios rather than investors’ tax returns directly. However, they form the basis of how VCTs generate returns.
Under previous rules, as portfolio companies grew, VCT managers often found themselves unable to continue backing them due to the funding limits for VCT investment. The result was that VCTs could see their ownership diluted as businesses entered a potentially more valuable phase of growth.
This has now changed.
The gross-assets limit has doubled from £15 million to £30 million immediately before an investment, and increased from £16 million to £35 million immediately afterwards. The annual investment limit has risen from £5 million to £10 million, and the standard lifetime limit from £12 million to £24 million. For knowledge-intensive companies, the annual limit has increased from £10 million to £20 million and the lifetime limit from £20 million to £40 million.
| VCT qualifying limit (2025/2026) | VCT qualifying limit (from 6 Apr 2026) | |
|---|---|---|
| Gross assets |
£15m before allotting shares £16m after allotting shares |
£30m before allotting shares £35m after allotting shares |
| Annual investment |
£10m (knowledge-intensive companies) £5m (all other companies) |
£20m (knowledge-intensive companies) £10m (all other companies) |
| Lifetime investment |
£20m (knowledge-intensive companies) £12m (all other companies) |
£40m (knowledge-intensive companies) £24m (all other companies) |
These seemingly technical adjustments could have far-reaching implications.
VCT managers now have more scope to support successful portfolio companies for longer and invest additional capital if they demonstrate commercial progress.
This could potentially allow shareholders to retain greater exposure to the businesses most likely to drive long-term performance.
Backing winners for longer
Finding promising companies matters, but retaining exposure as they scale could be just as important – most of the outcome tends to be concentrated in a small number of exceptional holdings.
Evidence gathered by the Association of Investment Companies (AIC) illustrates this. Among 418 companies receiving VCT investment between 2018 and 2024, 346 increased sales by a combined £1.3 billion. The top 20 companies generated 42% of that increase.
If VCTs cannot support those stronger companies in later rounds, they risk missing out on part of the future upside.
The higher limits give their VCT backers greater scope to participate in future rounds and retain exposure to further growth. For shareholders, the potential benefit is a larger share of the upside if these companies continue to grow.
“We can keep backing winners as they scale and that sustained support is what compounds value for shareholders over time.”
Below are four examples that illustrate how the increased limits could enable VCTs to keep on backing their most promising companies.
Please note that the examples of Popsa, AutomatePro and Summize are illustrative and do not necessarily reflect actual fundraising intent.
Keep backing winners
Elliptic
As cryptocurrencies have moved into the financial mainstream, so too has the need to police them. Elliptic has built a solution for this, helping banks, financial institutions, regulators and governments to identify money laundering, sanctions evasion and other forms of financial crime.
Today, Elliptic's solution has become critical infrastructure for the crypto industry. It screens more than one billion cryptocurrency transactions every week, providing the tools used to trace and monitor activity across some of the world's largest digital-asset networks.
The Albion VCTs were amongst the company’s earliest institutional backers in 2014 and continued to support it through several subsequent funding rounds. However, by late 2023, Elliptic had received £19.7 million of qualifying finance, leaving only £300,000 available under the former £20 million lifetime limit for knowledge-intensive companies.
As a result, existing VCT backers were effectively prevented from participating in a subsequent $15 million funding round, despite having supported the company's development for years.
The new £40 million lifetime limit addresses that issue directly. In April 2026, when the new limits became effective, Albion VCTs invested further into Elliptic as part of a $120 million round – supporting their winners further as they scale and grow.
International expansion
Popsa
Every year, billions of photos are taken, shared and then forgotten on smartphones. Popsa has built a business around helping people rediscover those memories, turning digital photos into personalised photo books, prints and gifts with just a few taps.
By 2025, the company was generating $58 million of annual revenue, shipping to 48 countries and recording its first $1 million-plus revenue days. The company remains in expansion mode and, like many successful technology companies, requires significant investment to support its ambitious plans.
Under the previous rules, existing VCT investors (Pembroke VCT, the Gresham House (formerly Mobeus) VCTs, Guinness VCT and the Octopus AIM VCTs) had effectively exhausted their ability to provide further qualifying funding.
The higher limits now create additional capacity for those investors to continue supporting Popsa’s expansion and mutually benefiting from any further growth.
Accelerating development
AutomatePro
Behind major software upgrades lie long processes of testing, documentation and risk management. AutomatePro helps automate that, enabling some of the world's largest companies, including Fortune 500 and FTSE 100 businesses, to make system changes more quickly and with greater confidence.
The British Smaller Companies VCTs invested £5 million in 2022 and subsequently provided further funding in 2024 and 2025. That capital helped support US expansion, product development, sales and marketing, and the rollout of new AI-led capabilities.
AutomatePro has already raised approximately £12 million of qualifying VCT and related funding, effectively reaching the previous lifetime limit.
The increase to £24 million creates meaningful additional capacity for future investment, allowing investors to continue participating in future funding rounds and the value they helped create.
Unlocking scaling potential
Summize
Every large business is swimming in contracts, yet most legal teams still spend huge amounts of time reviewing, negotiating and managing them manually.
Summize was created to change that. The company uses artificial intelligence to help organisations analyse contracts, identify risks and automate routine legal workflows, turning what has traditionally been a slow and highly manual process into something far more efficient.
Backed by the British Smaller Companies VCTs and the Maven VCTs, the company raised a £5 million Series A in 2022 before securing a £41 million Series B in 2026 to support international expansion and product development.
In total, Summize has already received close to £20 million of VCT and other qualifying funding, getting it close to the previous lifetime limit for knowledge-intensive companies.
With that limit now increased to £40 million, existing VCT backers can continue supporting the business as it scales if they so wish.
What could this mean for investors?
The VCT proposition has changed – that said, the remaining tax advantages can still be valuable. A qualifying £10,000 investment can reduce an investor’s income tax bill by up to £2,000, while dividends and capital gains remain tax-free. For those who have used their ISA allowance, face restrictions on pension contributions or value tax-free income, VCTs may therefore continue to merit consideration.
Following the recent changes, investors now receive less of an upfront tax benefit than before, but the changes to qualifying rules could open up opportunities.
The higher limits will not improve weak businesses or turn poor investments into winners. But if successful companies drive a disproportionate share of returns, giving VCTs greater scope to maintain meaningful stakes could have a material bearing on future performance.
Knowing this may also encourage VCT managers to allocate capital across a wider range of early-stage companies, confident that eventual winners can be backed for longer.
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Alex Davies
Founder and CEO
Alex was a board director at Hargreaves Lansdown, where he worked for 15 years. He was responsible for building Hargreaves Lansdown into the biggest direct-to-consumer SIPP provider in the UK with more than 150,000 clients and over £12 billion under management. He is a keen investor with a portfolio of shares, funds, student property, EIS and VCT investments.