Raising funds for your small business through venture capital schemes

What is a venture capital scheme?

A venture capital scheme is a government initiative to help small and medium-sized companies find investment.

And by way of incentive, investors in these schemes benefit from generous savings on both income tax and capital gains tax.

For businesses, venture capital schemes are a good way to raise funds for business growth, such as:

• Buying new business equipment

• Raising working capital or improving cash flow

• Research and development (R&D)

• Hiring new staff

Each scheme has slightly different rules, but the main requirement is that funds raised must go towards the improvement of your business in some way.

In this article, we explain how they can benefit smaller businesses, including details of several rule changes for VCTs and EISs announced in the 2025 Autumn Budget.

Is my company eligible for a venture capital scheme?

You can raise funds through a venture capital scheme (VCT or EIS) if your company is permanently based in the UK, isn’t on any recognised stock exchange and has gross assets of less than £15 million.

However, following an announcement in the Budget, that limit will increase to £30 million from 6 April 2026. This means more businesses will be able to benefit.

Some sectors are also excluded, such as legal and financial services, property development, and coal or steel production.

If you’re unsure, you can seek ‘advance assurance’ from HMRC or speak to a financial adviser before applying.

How much can my company raise through venture capital?

The maximum you can raise from all the venture capital schemes is currently £5 million in any 12-month period (rising to £10 million in April 2026) and £12 million during the lifetime of your business (rising to £24 million in April 2026).

However, there may be higher limits if your company carries out research and development (R&D) and innovation activities.

For knowledge-intensive companies, the annual limit will rise from £10 million to £20 million in April 2026, while the lifetime limit will go from £20 million to £40 million.

These limits apply to VCTs and EISs, but the third option - SEIS - has different limits.

Enterprise Investment Scheme (EIS)

The EIS is a way to raise millions from individuals buying new shares in your company (see above for annual and lifetime limits).

To qualify for EIS, the main criteria are that your business must:

• Have no more than £15 million gross assets  (£30 million from April 2026)

• Employ fewer than 250 full-time equivalent staff

• Have no more than 50% of its shares owned by another company

• Apply within seven years of your company’s first commercial sale (the first time you traded your services or products for money)

You must spend the money within two years of the investment, or the date you started trading, whichever is later.

You’re not allowed to use EIS investments to buy any size of stake in a new business.

Also, before you issue any shares, the investor(s) must have paid for them fully in cash.

Venture capital trusts (VCTs)

A VCT is a fund held by lots of investors, which makes indirect reinvestment into smaller companies.

VCTs are companies authorised by HMRC and listed on the London stock market, so investors can buy into them.

To be eligible for VCT investment, your company must have:

• Fewer than 250 employees or 500 if the company is knowledge-intensive (KI)

• Gross assets of £15 million or less (£30 million from April 2026)

Again, you can’t currently raise more than £5 million (£10 million from April 2026) in any 12-month period or more than £12 million (£24 million from April 2026) during your company’s lifetime.

These limits are £10 million and £20 million, respectively, for KI companies (rising to £20 million and £40 million in April 2026).

The other main difference with VCTs is that you don’t apply through HMRC, but instead approach the company yourself.

They don’t tend to invest in startups or micro-companies, and usually prefer companies that are already profitable.

Seed Enterprise Investment Scheme (SEIS)

Designed for new small companies, the SEIS allows individuals to invest up to £250,000 in fledgling companies.

To qualify, your company must have:

• Fewer than 25 full-time equivalent employees

• Gross assets of less than £350,000

• Been carrying out a new qualifying trade for less than three years

You won’t be able to use SEIS if you’ve already raised funds through the EIS or from a venture capital trust (VCT).

You must spend the money raised within three years of issuing shares to your investor(s), and (just like the EIS) shares must be paid for upfront in cash.

Why do investors choose venture capital schemes?

Venture capital schemes are a great incentive for investors to put money into your business.

Firstly, they are a way for people to invest in companies and social enterprises that are not listed on a stock exchange.

Secondly, investing in a venture capital scheme offers significant tax savings.

This makes it more attractive for investors to fund smaller, potentially fast-growing companies by mitigating some of the risk.

Tax reliefs that may be available (depending on the scheme) include:

• Income tax relief: On qualifying investments and loans to social enterprises.

• Capital gains tax relief: On gains made on investments and reinvestment of previous gains in the SEIS.

The SEIS offers income tax relief on up to 50% of an investment (though investments are capped at £200,000).

Currently, VCTs and EIS offer tax relief of up to 30% but from April 2026, relief on VCTs will be reduced to 20%. Tax relief applies to investments up to £1 million for EISs and £200,000 for VCTs.

How do I apply for funding through a venture capital scheme?

First, explore which scheme(s) are most suitable for your company, and check your eligibility. Then apply through HMRC (or directly in the case of VCTs).

Remember, you will need a strong new business pitch to demonstrate how your company will use the funding to achieve growth. 

Need expert help?

A good accountant will be able to take you through the funding process and advise you every step of the way.

Unbiased can quickly match you with a qualified accountant who can advise you on the best way to achieve your funding goals so your business can keep growing.