A bigger runway for UK growth investing and what it could mean for VCT investors and AIM

The UK’s Autumn Budget 2025 included a meaningful set of reforms to the Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS) rules, designed to help high-growth businesses access more “follow-on” capital as they scale beyond the start-up phase.

For investors, these changes matter because they expand the investable universe for VCTs and improve the ability of long-term capital to support companies through multiple funding rounds, potentially capturing more of the value creation journey. For the UK’s growth ecosystem, they have the potential to strengthen the bridge between private growth capital and the public markets, including AIM.

What’s changing from 6 April 2026

From 6 April 2026, the government intends to double the annual and lifetime company investment limits for both EIS and VCT qualifying companies, and to increase the gross assets threshold.

In practical terms:

• Annual company investment limit rises to £10mn (and £20mn for Knowledge Intensive Companies)
• Lifetime company investment limit rises to £24mn (and £40mn for Knowledge Intensive Companies)
• Gross assets test increases to £30mn before share issue and £35mn after

Alongside the expanded company eligibility thresholds, the government also announced that upfront VCT income tax relief will reduce from 30% to 20%, effective 6 April 2026. These changes are expected to be legislated through Finance Bill 2025–26.

Why higher company limits could be positive for investors

At its core, this package is intended to support a reality that many UK growth companies face: the capital required to scale has increased, and companies often need more financing, over a longer period, before they reach sustainable profitability, meaningful cash generation, or a successful exit.

From an investor perspective, higher company limits can be helpful in three important ways:

1. A wider opportunity set – by increasing the gross assets and investment limits, more established scale-ups may remain eligible for VCT/EIS funding for longer. That potentially broadens the pool of businesses that can qualify, particularly those moving from “early traction” into “scaling execution”.
2. More scope for follow-on investing – The changes are explicitly aimed at allowing investors to “follow-on as companies grow beyond the start-up phase.” That matters because in growth investing, outcomes are often driven by backing the winners more meaningfully over time, once key milestones have been met and risk has reduced.
3. The potential to capture value across more of the company lifecycle – Our approach across the VCT portfolios has long recognised that investing in multiple rounds can improve decision-making and conviction as businesses mature. Investing across multiple funding rounds allows additional capital to be deployed with increased conviction as the business grows and achieves agreed milestones. Our investment approach cannot guarantee returns.

And what about the VCT tax relief reduction?

The reduction in upfront VCT income tax relief from 30% to 20% is significant, and it will naturally change the way some investors think about portfolio construction and required returns.

The government’s stated rationale is to better balance incentives between EIS and VCTs and to encourage VCTs to target higher-growth opportunities. Whether this achieves the intended outcome will depend on how the market responds, both in terms of fundraising and the opportunity set for deployment.

What we would emphasise is that tax relief should be a benefit, not the investment case. VCTs remain higher-risk, long-term investments, where performance depends on disciplined selection, active portfolio management, and successful exits.

How these changes could support AIM

AIM plays an important role in the UK growth company ecosystem, supporting jobs, innovation, and access to public market capital. AIM supports substantial UK GVA and employment, and has enabled significant capital raising since inception.

We think the Budget reforms can be relevant to AIM in two ways:

1. More patient capital for listed growth companies – Larger VCT/EIS company limits can make it easier for qualifying companies to raise meaningful funding without immediately “ageing out” or hitting old size constraints. Over time, that can help companies choose the right path to public markets, whether that’s listing earlier to access growth capital, or listing later with stronger scale and resilience.
2. Momentum for broader AIM reform – The debate on AIM competitiveness has increasingly focused on liquidity and maintaining incentives that attract long-term capital. We highlight practical fixes such as maintaining tax incentives that attract patient capital and easing limits on company size/age/capital to help SMEs scale, alongside measures to improve liquidity.

Taken together, greater flexibility on company eligibility and the ongoing policy focus on growth markets could be constructive, particularly if it results in deeper pools of long-term capital supporting UK-listed innovators.

What we’ll be watching next

As these changes move toward implementation (April 2026), three questions will matter most:

1. Will the expanded limits translate into better growth funding outcomes for UK scale-ups?
2. How will investor demand respond to the VCT relief reduction, and what does that mean for capital availability?
3. Can policy momentum improve the broader UK growth market environment, including AIM liquidity and valuations?

Closing thought

These reforms are a reminder that the UK is still actively shaping the architecture of its growth capital markets. For investors who can take a long-term view and accept the risks inherent in smaller company investing, the increase in eligible company limits could support a broader and more mature opportunity set at a time when the UK needs more scale-up capital, and public markets need renewed depth.

Risk warning: Past performance is not a guide to future performance. Capital at risk. Tax treatment depends on individual circumstances and may change. VCT shares may be illiquid and difficult to sell. 

This document has been issued as a financial promotion for the purposes of Section 21 of the Financial Services and Markets Act 2000 by Gresham House Asset Management Limited (Gresham House) whose registered office is 5 New Street, London EC4A 3TW and is authorised and regulated by the Financial Conduct Authority (FCA) (682776).

Author

Ken Wotton Managing Director, Public Equity	Trevor Hope Managing Direct & CIO, VCTs