Share Saving Scheme

ketherin · 15 March 2005 at 7:11PM

My wife works for a well know Building Society, 5 years ago she was offered a company share scheme whereby she could save upto £250 per month for 5 years and at the end purchase the shares at the price given at the beginning.

The share price she was given was £3.80 and the current price is about £8.70, and she paided in the max £250 so obviously things have gone very well.

My question is when the end date is due in Nov this year can we convert the monies paid in and buy the shares and sell them imediatly without having to pay any tax ? or do we have to abide by the CG tax rules which means we'll have to sell a certain amout each year ?

Or do we have any other options ?

Thanks for any help.

quinlanmd · 15 March 2005 at 7:34PM

I've checked the details of my company's Sharesave scheme, which is IR approved and thus, I assume, has standard terms.

Gains are subject to Capital Gains Tax, thus the choice is normally between taking the full gain and the CGT hit or drawing down the shares over more than one year to keep within the CGT limits (and thus risking negative movements in the share price in the meantime).

I'm sure some experts will be able to advise if there are ways of avoiding or deferring the CGT.

dunstonh · 16 March 2005 at 12:41AM

An approved profit sharing, SAYE an Share incentive scheme can be transferred into an Equity ISA (normally self select ISA would be used) within the first 90 days without the crystallisation of Capital Gains Tax.

Hold on for longer than the cancellation period (which can be upto 30 days). Then encash it and you avoid all CGT.

Gordon Brown did weaken these rules some years back. It will now count towards your ISA contributions (it didnt in the old days do demutualisations of £10-15k payouts became tax free without using allowance - GB closed the demutualisation into PEP/ISA too).

ketherin · 17 March 2005 at 8:32AM

Sorry for my ignorance, but are you saying that at the end of the 5 years transfer the cash value into the shares, then put those shares into an ISA, or cash the shares and put the proceeds into an ISA (the value of theses shares will be about 50K).
Then hold on longer than the cancellation period of the ISA's, then cash them in and it's free of any CGT?

Thanks

dunstonh · 17 March 2005 at 9:20AM

You have to use a equity isa, not cash. The usual terminology used for this type of isa is called "self select ISA". The shares are transferred into the ISA. Once in there and past cancellation rights, you can surrender without CGT or transfer it to a equity isa invested in funds.

ketherin · 17 March 2005 at 10:52AM

Yippee!!! thats really good news as we want to get our hands on the cash to pay off the mortgage, without paying CGT, looks like you have the answer.

Thanks for all your help,

ketherin · 17 March 2005 at 10:54AM

Only other question about this, can we put shares worth about 50K into an equity ISA?

lipidicman · 17 March 2005 at 2:32PM

up to 7k a year in a maxi ISA and no more - unless dunstonh has some insider knowledge!

dunstonh · 17 March 2005 at 6:02PM

You could in days of the Conservative Govt but its another allowance Gordon Brown ened. It now goes towards the 7k limit.

It may be possible to transfer 7k worth of shares to wife/husband and ISA those to use both allowances. I would have to check up on that to make sure first though.

Another allowance you would have is to transfer some to wife/husband to use both CGT allowances up.

It sounds like a nice sharesave scheme to be that sort of amount. Back in my banking days, I never recall my sharesave schemes coming out like that!!!

ketherin · 17 March 2005 at 9:07PM

yes, the scheme has been really good for us, the share price we were quoted 5 years ago was £3.80 and they are currently trading at around £8.80, and my wife is paying the max £250 per month, it ends in Nov this year so fingers crossed the price stays around th £9.00 mark means they are worth around 50k.....(allience & leicester)

Katgoddess · 17 March 2005 at 10:32PM

I have my sharesave scheme maturing in the summer. I will bear this in mind.

I forgot about CGT. (How?)

My plan was to keep hold of them until I get the first amount of dividends. But I won't do that if I have to pay tax.

Cheers :beer:

Share Saving Scheme

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