The secondhand market for venture capital trusts (VCTs) – which give tax relief on investments in fledgling companies – is becoming more active, as investors look to buy traded VCTs for the tax-free dividends they offer.

Financial advisers and asset managers now believe the secondary market will become more significant, even though it remains relatively illiquid – making VCT shares difficult to sell. Some advisers are already spending more time conducting due diligence on older VCTs with mature portfolios, to find opportunities to buy into stable tax-free annual yields of as high as 8 per cent.