The fundraising figure for venture capital trusts (VCTs) for the 2017/18 tax year was £728m, the highest level recorded in over ten years and the second highest in history, according to new data from the Association of Investment Companies (AIC).
The sector raised £728m between April 2017 and the end of the tax year on 5 April 2018, the highest amount since the inception of the VCT and an increase of 34% on the previous year's £542m figure.
It is also the highest amount ever raised at the current level of 30% upfront tax relief.
The highest figure recorded was during the 2005/6 tax year when the sector raised £779m, and the initial tax relief on investments was 40%.
As at 5 April, assets under management for the sector were £4.3bn, up from £3.9bn as at 5 April 2017.
Ian Sayers, chief executive of the AIC said: "The 2017/18 fundraising figure is testament to the demand for VCTs from investors.
"It is the second highest fundraising amount since VCTs were introduced in 1995 and significantly more than in 2016/17, which was the previous second-highest total of £542m.
"This year's bumper fundraising has been boosted by the government's recognition of VCTs as effective providers of patient capital in the November 2017 Budget, as well as the pension rule changes and VCTs' strong long-term growth and income record."
Alex Davies, CEO and founder of Wealth Club, added: "VCT investment reached its second highest level ever this year. The high demand was largely due to pensions no longer being the answer for many higher earners, as tight contribution limits meant the income they could receive at the end amounted to little more than the living wage.
"In addition, changes to buy-to-let have made it more of a hassle and a less attractive way to invest. VCTs are therefore an obvious and tax-efficient choice for sophisticated investors. Now the new tax year has begun, we look forward to new VCTs opening, giving investors the opportunity to back exciting smaller companies that offer great potential."
Historic VCT fundraising figures excluding enhanced share buy-backs
|Tax year||Fundraising (£millions)|