For professional advisers and paraplanners only. Not to be relied upon by retail clients.
By Kristy Barr, Co-Head of Retail at Octopus Investments
Venture Capital Trusts (VCTs) were introduced 30 years ago to encourage investment in UK growth businesses by offering tax incentives to investors. Since then, they’ve provided over £12 billion1 in funding, helping companies like Depop, Graze, and Zoopla grow into household names.
By backing early-stage businesses, VCTs have driven job creation, innovation, and economic growth. Octopus has played a key role, becoming the UK’s largest VCT provider2 by working with financial advisers to offer tax-efficient investment opportunities. With strong demand, VCTs remain a vital tool for supporting UK entrepreneurship and helping investors diversify their portfolios.
Remember, VCTs are a high-risk investment placing investors’ capital at risk.
Recent Budget measures have reinforced the demand for VCTs. The extension of VCT legislation until 2035 provides long-term stability, while higher capital gains tax rates, reduced dividend and savings allowances, and pension rule changes have made VCTs even more attractive for tax-efficient investing.
As traditional tax allowances shrink, investors are actively seeking alternative ways to manage their wealth. VCTs provide access to exciting, high-growth businesses that are often unavailable through traditional investment routes. Financial advisers are increasingly incorporating VCTs into portfolios—not just for their tax benefits but also for their long-term growth potential.
The VCT market has matured significantly, now offering investors a wide range of choices. It’s not unusual to see 40 or more VCTs raise funds in a tax year, each with a distinct investment approach. While all focus on early-stage UK businesses, their specific mandates vary, allowing investors to tailor portfolios to their goals and risk appetite.
One of the key advantages of VCTs is diversification. By spreading capital across multiple sectors and businesses, investors can reduce concentration risk while maintaining exposure to high-growth opportunities. If one sector underperforms, gains in other areas may help balance overall returns. This makes VCTs a compelling option for those looking to manage investment volatility while accessing innovative businesses with strong growth potential.
It’s important to note that due to the nature of smaller company investing, the value of a VCT can be volatile, and they may be difficult to sell.
With so many options available, choosing the right VCT is crucial. This is where a trusted provider makes a difference. Octopus offers a range of VCTs, each backed by a strong investment team and infrastructure:
- Octopus Titan VCT – Invests in high-growth, tech-enabled businesses.
- Octopus AIM VCTs – Focus on growth companies listed on the Alternative Investment Market (AIM).
- Octopus Future Generations VCT – Targets businesses aiming to build a sustainable planet, empower people, or revitalise healthcare
- Octopus Apollo VCT – Invests in business-to-business software companies that have successfully brought their products to market and are seeking capital to accelerate growth.
Many investors choose to build a diversified portfolio of VCTs to spread risk and increase exposure to different types of high-growth businesses.
After three decades, the VCT market has matured into a space where there is an investment opportunity for every suitable client looking diversify their portfolio. We look forward to supporting the growth of the market and UK businesses for the next 30 years.
If you’d like more information, you can compare Octopus VCTs.
[1] Venture Capital Trusts statistics: 2024, gov.uk, May 2024
2 By FUM, AIC VCT annual fundraising data, April 2024
VCT investments are not suitable for everyone. Any recommendation should be based on a holistic review of your client’s financial situation, objectives and needs. This communication does not constitute advice on investments, legal matters, taxation or any other matters. This advertisement is not a prospectus. Any decision to invest should only be made on the basis of the information contained in the prospectus, supplementary prospectus (where applicable), AIFMD supplement (where applicable) and the Key Information Document (KID) of each VCT which can be obtained from octopusinvestments.com. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England and Wales No. 03942880. Issued: March 2025. CAM014827.
