Tax‑impact of the NAV change
Octopus AIM VCT is a Venture‑Capital Trust, which means that any share purchase qualifies for 30 % income‑tax relief (up to the £200 k annual limit), tax‑free dividends and a deferral of capital‑gains tax (CGT) on any disposal that is reinvested in another VCT within 30 days. A change in net‑asset‑value (NAV) itself is not a taxable event, but the market typically re‑prices the shares to reflect the updated NAV. If the updated NAV is higher, the share price may rise, creating a potential capital‑gain for shareholders who bought at a lower price. Conversely, a lower NAV could depress the price, potentially eroding unrealised gains and increasing the risk of a CGT liability when the position is eventually sold.
Trading implications & actionable steps
1. Hold for tax‑relief – If you are still within the 5‑year VCT holding period, keep the shares to preserve the 30 % income‑tax relief and the CGT deferral. Selling now would crystallise any gain (or loss) and trigger CGT (subject to your annual CGT allowance).
2. Timing of disposals – If the NAV increase pushes the market price above your cost basis, consider whether the realised gain is worth the loss of VCT tax benefits. For investors who have already exhausted their annual income‑tax relief limit, the primary incentive is CGT deferral, so a sale should be timed to coincide with another VCT purchase (within 30 days) to maintain the deferral.
3. Watch the price‑NAV drift – Technical traders often monitor the spread between the market price and the NAV. A widening discount may present a buying opportunity for long‑term, tax‑efficient investors, while an expanding premium could be a signal to lock in gains, especially if you have already maxed out the tax‑relief allowance.
In short, the NAV update itself does not trigger tax, but any resulting price movement will affect the timing and tax efficiency of any future buy‑ or sell‑order. Use the NAV‑price relationship to decide whether to realize a gain now (accepting CGT) or continue holding to keep the VCT’s tax‑advantaged status.