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  • FIRST POST
    • bluepill77
    • By bluepill77 10th Feb 18, 11:45 PM
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    bluepill77
    Tax on shares?
    • #1
    • 10th Feb 18, 11:45 PM
    Tax on shares? 10th Feb 18 at 11:45 PM
    Hi There,

    First post and hope you fine folk can help!

    I've not always been in this position but I earn a decent wage, (around 60k pa plus a yearly bonus of about 10%(in a good year)). I have about 10-12k debt, (assorted credit cards & overdrafts), plus I lease a car so am on the hook for that. I've zero savings little or no pension and generally in a month to month mess with a family to support. I would love to buy a house, but i'm 40 now so without a significant downpayment that will remain out of reach.

    Backdrop described i'll continue - 3 years ago i was awarded a three year share incentive which meant that they put $50000 worth of shares into some sort of waiting state and in a month or so that is handed over to me - the premise being it could have been more or less than the original amount. In this case it's now around 70-80k in dollars.

    I've never had any kind of shares before and I'm on PAYE through the company. The tax system mystifies me.

    Now first move i wanted to be to get debt free asap. This would free a lot of money per month and make long term saving/paying into a pension a realistic prospect.

    However if I cashed all of my shares in I could do that AND put a sizeable deposit down on a mortgage but I have no idea what my tax exposure would be. Is it capital gains or income tax?

    Or would it be better to cash out some of it per year if there's a mystical allowance i can have?

    Is there any advice anyone could offer in this area?

    Thank you!
Page 1
    • Keep pedalling
    • By Keep pedalling 11th Feb 18, 1:05 AM
    • 4,516 Posts
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    Keep pedalling
    • #2
    • 11th Feb 18, 1:05 AM
    • #2
    • 11th Feb 18, 1:05 AM
    Looking at UK share incentives, there is a limit of £3600 per tax year of free shares you can receive from your company that can be received tax free, and even then the share need to be held in the scheme for 5 years.

    You obviously work for a US company, and I dont see how these share are protected from UK tax in any way, so I believe you will be paying income tax on the lot at the current value, but I am sure someone with more knowledge than I will correct me if I am wrong.
    • Tom99
    • By Tom99 11th Feb 18, 1:47 AM
    • 1,239 Posts
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    Tom99
    • #3
    • 11th Feb 18, 1:47 AM
    • #3
    • 11th Feb 18, 1:47 AM
    I think only your employer can answer the question about what income tax and CGT you will pay once you accept and maybe sell the shares. If CGT is involved then if you are married you can transfer some/all of the shares to your spouse if that saves tax.

    It would not be a good idea to hold $80k worth of shares in the company you work for as your only investment but if a delayed sale can save some 40% tax it may be worth staggering the sale.
    • choccielover
    • By choccielover 11th Feb 18, 8:25 AM
    • 379 Posts
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    choccielover
    • #4
    • 11th Feb 18, 8:25 AM
    • #4
    • 11th Feb 18, 8:25 AM
    These sound like share options. Were you not given any sort of information when the option was awarded? Mine come with a whole lot of scheme rules explaining the tax position.

    The shares don;t actually exist till you take the option. I5 sounds like you;ve had a 3 year vesting period (can;t touch them) and now there;s typically a period (another 7 years maybe) for you to do something with them.

    Were they awarded at the value at that time and you keep the difference between the price then or now or do you just have the $50k as a set amount??

    The tax position is different for each scenario I think so you need to understand more about this.

    Your company payroll team may be able to offer help
    Last edited by choccielover; 11-02-2018 at 8:27 AM.
    • bluepill77
    • By bluepill77 11th Feb 18, 12:38 PM
    • 4 Posts
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    bluepill77
    • #5
    • 11th Feb 18, 12:38 PM
    • #5
    • 11th Feb 18, 12:38 PM
    I work for a uk company that is owned by an American parent company. I'm paid from the uk but these shares were issued in the parent company.

    I'll ask some questions of the payroll people but they awarded 40 shares I couldn't touch for three years. From next month they are mine and whatever they are worth. Having had previous employee shares that came to sweet fa I took it all with a pinch of salt which was a mistake as I'm sorely light on information now!
    Last edited by bluepill77; 12-02-2018 at 12:37 AM.
    • bluepill77
    • By bluepill77 11th Feb 18, 4:48 PM
    • 4 Posts
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    bluepill77
    • #6
    • 11th Feb 18, 4:48 PM
    • #6
    • 11th Feb 18, 4:48 PM
    I believe it should only be capital gains tax at 20%
    • Keep pedalling
    • By Keep pedalling 11th Feb 18, 6:20 PM
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    Keep pedalling
    • #7
    • 11th Feb 18, 6:20 PM
    • #7
    • 11th Feb 18, 6:20 PM
    I believe it should only be capital gains tax at 20%
    Originally posted by bluepill77
    What makes you think that?
    • Keep pedalling
    • By Keep pedalling 11th Feb 18, 6:44 PM
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    Keep pedalling
    • #8
    • 11th Feb 18, 6:44 PM
    • #8
    • 11th Feb 18, 6:44 PM
    Just a thought, was this done under the now defunct Employee Shareholder Status (ESS) sheme? where you were given the shares in return for giving up as bunch of your employee rights.

    If so you are exempt from CGT, but not income tax, as you would have been deemed to have purchased the shares for a cost of £2000, and the market value above that is treated as income.

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/571645/Updated_AS16_changes_Tax_treatment_of_ES_guidance. pdf
    • Daniel54
    • By Daniel54 11th Feb 18, 7:38 PM
    • 587 Posts
    • 696 Thanks
    Daniel54
    • #9
    • 11th Feb 18, 7:38 PM
    • #9
    • 11th Feb 18, 7:38 PM
    These sound like RSUs ( residual stock units ).If so,when they vest they will be subject to income tax and NI.You need to check with your employer and/or the broker that will be holding the shares.Whenver I have sold,I have been given the option of netting off my tax liabilities from the proceeds ,
    • redmalc
    • By redmalc 11th Feb 18, 8:18 PM
    • 1,267 Posts
    • 477 Thanks
    redmalc
    Keeppeddaling

    Are you sure the ESS scheme is subject to Tax as I was advised no tax and no CGT because of the rights I waived at the start of the scheme.
    I was given 48K worth of shares over three years and am now looking to sell them
    • Keep pedalling
    • By Keep pedalling 11th Feb 18, 9:15 PM
    • 4,516 Posts
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    Keep pedalling
    Keeppeddaling

    Are you sure the ESS scheme is subject to Tax as I was advised no tax and no CGT because of the rights I waived at the start of the scheme.
    I was given 48K worth of shares over three years and am now looking to sell them
    Originally posted by redmalc
    The first link I provided seems to be broken but the following one says the same thing, no tax or NI on the first £2000 the rest would seem to be taxable and subject to NI.

    https://www.wrighthassall.co.uk/employee-incentives/enterprise-shareholder-scheme-ess/

    If that is correct then now might be a good time to reduce the tax by a hefty salary sacrifice into you company pension scheme, especially as you say you currently have very little in the way of pentimento provision.
    • bluepill77
    • By bluepill77 12th Feb 18, 12:56 AM
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    bluepill77
    looking closer in the stock portal - they are RSUs

    "If you get shares through a Share Incentive Plan (SIP) and keep them in the plan for 5 years you won’t pay Income Tax or National Insurance on their value."
    does this mean if i leave them another two years i don't pay income or NI?

    "You won’t pay Capital Gains Tax on shares you sell if you keep them in the plan until you sell them."
    This is murky and seems to suggest i don't need to pay anything if i just leave them long enough...?

    "If you take them out of the plan, keep them and then sell them later on, you might have to pay Capital Gains Tax if their value has increased."
    This is quite unclear too, the only way i would "take them out" would be to sell them - i don't understand the distinction
    • Keep pedalling
    • By Keep pedalling 12th Feb 18, 10:35 AM
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    Keep pedalling
    I think the key word in your first quotation is If

    SIPs have a limit of way below $50,000 that can be given tax and NI free, so your shares will not be in a SIP.

    https://www.out-law.com/topics/tax/share-plans/share-incentive-plans-sips/
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