What is a venture capital trust?

Venture capital trusts (VCTs) invest in fledgling private companies that need capital to grow and aren’t quoted on any stock exchange. Without venture capital, many up-and-coming firms wouldn’t be able to expand.

Where have you heard about venture capital trusts?

VCTs were created in the UK in April 1995 as a way to help small companies get the money they need to flourish. Venture capital trusts must be approved by HMRC, and there are strict rules on how they can invest pooled money.

What you need to know about venture capital trusts.

To make VCTs attractive to investors, they offer generous tax breaks. Profits are usually paid to VCT investors as tax-free dividends. However, you shouldn't decide to invest in a VCT just because you're tempted by the tax benefits.

VCTs are an exciting investment proposition, but they’re also a big risk as smaller companies can be prone to failure. The value of VCT shares can fluctuate and you could end up getting back less than you put in. That’s why they’re usually aimed at wealthier investors.

Find out more about venture capital trusts.

Read our definition of venture capital for more information on investing in fledgling companies.