Last updated: 14 October 2026
Are dividends from venture capital trusts tax-free?
Yes. Dividends from shares in a venture capital trust (VCT) are exempt from income tax, as long as you bought the shares when they were newly issued or in the market within the annual £200,000 investment limit. You don’t need to report VCT dividends on your tax return. Gains on selling VCT shares are also exempt from capital gains tax. For new shares issued from 6 April 2026, you also get 20% income tax relief on the amount you invest (30% before then), if you hold them for at least 5 years.
VCT tax reliefs at a glance
| Relief | Condition |
| 20% income tax relief (30% before 6 April 2026) | New shares; hold for 5 years; up to £200,000 a tax year |
| Tax-free dividends | Shares within the £200,000 annual limit |
| CGT-free gains | Shares within the annual limit |
| No CGT deferral | Unlike EIS, VCTs don’t defer gains on other assets |
Income tax relief can only reduce your tax bill to nil; it can’t create a refund beyond the tax you’ve paid.
The April 2026 change
Finance Act 2026 cut VCT income tax relief from 30% to 20% for shares issued on or after 6 April 2026. At the same time, the limits on the size of companies VCTs and EIS can invest in were increased. Shares issued before that date keep 30% relief. You can claim VCT relief up to 4 years after the end of the tax year you invest.
Example
Lucy invests £20,000 in a new VCT issue in 2026/27. With 20% relief, she reduces her income tax bill by £4,000. The VCT pays a 5% dividend, £1,000 a year, which is tax-free and doesn’t use her £500 dividend allowance. If she sells after 5 years for £22,000, the gain is tax-free. If she sells within 5 years, she loses the income tax relief.
Risks
VCTs invest in small, unlisted or AIM-listed companies, so they are high risk. Share prices often trade at a discount to net asset value, and they can be hard to sell. Treat the tax relief as a bonus, not the reason to invest, and get regulated financial advice.
VCTs vs EIS vs ISAs
| Feature | VCT | EIS | ISA |
| Income tax relief | 20% | 30% | No |
| Tax-free dividends | Yes | No | Yes |
| CGT-free gains | Yes | Yes, after 3 years | Yes |
| Annual limit | £200,000 | £1 million (£2 million for knowledge-intensive) | £20,000 |
Buying second-hand VCT shares
Second-hand VCT shares bought on the stock market don’t get income tax relief, but dividends and gains are still tax-free within the annual limit.
VCTs and inheritance tax
VCT shares are not covered by Business Property Relief, so they stay in your estate for inheritance tax at full value. EIS shares can qualify for BPR after 2 years.
Frequently asked questions
Do I declare VCT dividends on my tax return?
No.
How do I claim the income tax relief?
Through Self Assessment or by asking HMRC to adjust your tax code, using the certificate from the VCT.
What if I die within 5 years?
The relief isn’t withdrawn.
Can I buy through my company?
No, VCT reliefs are for individuals.
Related: reducing dividend tax and salary or dividends.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with investing tax-efficiently. See our tax planning accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
