The number of investors claiming tax relief on a venture capital trust (VCT) investment has increased by 32% year-on-year to 25,800.

According to the latest figures published by HMRC, which cover 2021/22, VCT investors claimed income tax relief on £1.04bn of investment, a value worth an increase of 61% from 2020/21.

HMRC suggested the figures reflect the increase in funds raised by VCTs in that tax year. Amounts claimed as tax relief are reported with a one-year time delay due to the nature of the self-assessment reporting system.

Elsewhere, the data showed that the average amount invested by an individual was around £40,000. Those investing between £150,000 and £200,000 accounted for just 6.7% of all VCT investors, but 32.2% of all funds raised.

Investment manager at Wealth Club, Nicholas Hyett, said that the latest data from HMRC shows that “VCTs continue to grow in popularity”, but added that the limits in place around VCTs are “due a review”.

“The trend is great news for UK start-ups, driving a 61% increase in tax relief qualifying VCT investments and significantly increasing the funding available to UK entrepreneurs through the scheme,” Hyett said. “The scheme could be even better though.

“There are signs the £200,000 a year limit on VCT investments, unchanged for nearly 20 years, is capping the funding available to small businesses. The largest VCT investors, those investing £150,000 to £200,000 a year, account for just 6.7% of investors, but 32.2% of funds raised. Almost all are hitting the £200,000 a year maximum – and would potentially invest more if the scheme allowed, unlocking significant further funding for small UK businesses.

“With economic growth and support for smaller companies a key priority for both political parties, the £200,000 limit is overdue a review.”

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