Government data found 2021-22 was a "record breaking" year for venture capital trusts as investors increased by 32 per cent.
The data showed the number of VCT investors who claimed income tax relief rose to 25,800 in 2021-22.
This covers those that made claims through self-assessment rather than other forms, like PAYE.
HMRC said the increase in investment in the period could show the impacts of the pandemic were lower than expected.
The report stated: "The increase in investment in 2020 to 2021 suggests Covid impacts may have been lower than expected, or the success of certain sectors and businesses during the pandemic in conjunction with investors having more time and capital resources to spend allowed for an earlier rebound.
"This increase in investment was further shown in 2021 to 2022, with it being a record-breaking year for VCT investment. It is believed that this was due to a strong rebound from the Covid-19 pandemic as seen in the performance of the wider venture capital industry.
"Additionally, the freeze on pension allowances and the income tax personal allowance has enhanced the tax advantages of investment in a VCT and, therefore, the appeal of the scheme to investors."
Those investing between £25,000-£50,000 accounted for 18.9 per cent of investors, the highest proportion, followed by 17.2 per cent investing from £5,000-£10,000.
Nicholas Hyett, investment manager at Wealth Club, pointed out more than half of investors claimed relief on less than £20,000 of investments.
He said: "The trend is great news for UK start-ups, driving a 61 per cent increase in tax relief qualifying VCT investments and significantly increasing the funding available to UK entrepreneurs through the scheme."
However, Hyett said the scheme could be improved.
Currently the annual limit on investment which relief can be claimed on is £200,000, which has remained unchanged for 20 years.
Hyett added: "The largest VCT investors, those investing £150,000 to £200,000 a year, account for just 6.7 per cent of investors, but 32.2 per cent of funds raised.
"Almost all are hitting the £200,000 a year maximum – and would potentially invest more if the scheme allowed, unlocking significant further funding for small UK businesses.
"With economic growth and support for smaller companies a key priority for both political parties, the £200,000 limit is overdue a review.”
The government is expected to publish additional data on how much was raised by VCTs in May 2024.
tara.o'connor@ft.com
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