Frozen tax thresholds have driven investors to make the most of various tax reliefs and tax-free allowances.
Income tax relief on VCTs can be valuable for high earners who use up their Isa allowance and pension contributions in full each year. However, VCTs are risky assets, so they are generally only suitable for experienced investors.
As well as cutting income tax relief, the Chancellor has doubled the maximum amount a VCT business can raise annually to £10m and increased the lifetime limit to £24m.
Will Fraser-Allen, of investment firm AlbionVC, said: “We’re delighted to have higher limits this coming year, but by cutting the very relief that drives capital into those businesses, the Treasury risks pulling the rug out from under the great momentum VCTs have had funding the UK’s ‘growth economy’.”
A spokesman for the Treasury said: “We have the right economic plan to help our start-ups and scale-ups flourish. Our reforms to venture capital trusts and the enterprise investment scheme are expected to support around £100m of extra investment a year.
“We are also quadrupling the company asset limit for the enterprise management incentives scheme, to help the highest potential scale-ups attract the talent they need to grow.”
