From April 2026, both the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) are set to undergo significant reforms, as announced in the Autumn Budget.
These changes are designed to modernise the schemes, which have long been viewed as outdated and align them more closely with the Government’s push to support entrepreneurship and scaling businesses, while adjusting the balance of tax relief across different investment options.
Who will be affected?
A policy paper released after the Autumn Budget highlighted the main measures of the reforms, which will impact companies raising funds under EIS and VCTs, individual investors using these schemes and fund managers and advisers involved in structuring and promoting eligible investments.
It’s expected that several hundred businesses will benefit directly from these changes, particularly those that have been constrained by existing funding or asset limits.
However, the 24,000 individual investors who currently take advantage of VCT Income Tax relief will see a reduction in the relief available.
What are the key changes?
Upcoming legislation will amend the Income Tax Act 2007, introducing several important changes, including:
- The gross assets requirement for a company will rise to £30 million before the issue of shares, up from £15 million, while the post-issue limit will increase to £35 million, up from £16 million.
- The annual investment limit will double to £10 million, up from £5 million, with a corresponding increase for knowledge-intensive companies to £20 million, up from £10 million.
- The lifetime investment limit will also double, increasing to £24 million for companies, up from £12 million and to £40 million for knowledge-intensive companies, up from £20 million.
- The Income Tax relief for individuals investing in VCTs will be reduced from 30 per cent to 20 per cent.
Certain companies in Northern Ireland, particularly those involved in electricity generation and supply, will remain unaffected by these changes and must continue to follow the current limits.
If you’re wondering how these changes to EIS and VCTs will impact you or your business, get in touch with our team today.