As we head toward the Budget, the outlook for Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS) remains broadly stable but with several areas where targeted change is looking increasingly likely.
Here are the key themes shaping expectations:
Core reliefs likely to stay
Most analysts expect the government to preserve the 30% income tax relief and Capital Gains Tax (CGT) exemption given their importance in supporting startups. Cross-party support and Labour’s decision to leave the schemes untouched in 2024 suggest continuity rather than disruption.
Budget could signal a move to raise limits
Industry pressure, including from the Venture Capital Trust Association (VCTA), and the erosion of real values through inflation has impacted sectors, such as Cleantech requiring more capital, and raising limits is seen as a practical way to enhance the schemes without significant cost to the Treasury. The Budget may include steps to increase investment limits. However, any increase would require legislation and EU/UK subsidy control approval, so changes may be phased in (note the government has already agreed to this legal extension through Section 11 of the Finance Act 2024 and associated regulations amended the Income Tax Act 2007 to move the sunset date from 6 April 2025 to 6 April 2035).
Fixing regional barriers
Reform to “age limit” rules may be floated in the Budget. Tying tests to the age of the trade (rather than the legal entity) and equalising at 10 years, would be a major levelling-up win especially for companies scaling more slowly outside London.
Regulatory competitiveness on the agenda
The upcoming Budget is expected to reinforce the UK’s competitiveness push. This could include signals on:
- streamlining Financial Conduct Authority (FCA) authorisation,
- easing Senior Managers Certification Regime (SMCR) burdens,
- updating the Alternative Investment Fund Manager (AFIM) regime, and
- backing new structures like the Reserved Investor Fund (RIF).
Together, these would make the UK more attractive for fund launches supporting growth and capital formation.
EU – UK cooperation
In relationships with the EU, the sector would like to see continued movement towards working together. The changes in the US including the GENIUS act (Stablecoins) mean that both sides can benefit from working together to show a stronger hand. The EU-UK Financial Regulatory Forum on 1st October 2025 had some good positive outcomes and hopefully we can see further discussion of working together in the Budget statement. The UKs own Stablecoin regime would benefit from acceleration from its ‘2026’ finalisation of rules.
CGT in the spotlight
CGT changes are a realistic Budget lever. The annual exemption allowance, already significantly reduced, could be trimmed again. This could prompt many investors to bring forward disposals to avoid future tax liabilities. This would have knock-on effects for wealth managers and financial advisers.
Bottom line for budget 2025
If the 2025 Budget delivers on limits, regulatory simplification, and cross-border cooperation, VCT and EIS could emerge even stronger as tools for growth, innovation, and regional investment.
For tailored advice on VCTs, EIS or advice post Budget, feel free to reach out to speak with one of our experts.
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