Paying Tax on Employee Share Purchase Plans

unsaltedrhino

Hi there,

I've been part of the employee share purchase plan at my place of work for over a year now. Basically 10% of my salary is set aside each month and then every 6 months shares in the company are purchased (at the lowest rate at the start or end of the 6 month period at a 15% discount) for me under an ETrade account. Recently I have sold a number of these shares and am wondering how exactly I sort out paying tax on these sales? I think I'm OK regards the initial purchase since;

"Under UK tax legislation, any gains made on the purchase of ESPP shares are subject to Income Tax . Any tax due will be deducted through the payroll in the month or months following the purchase of the shares."

Thanks in advance.

Rafter

Think you have answered your own question? Looks like your payroll will deal with any tax due during the scheme.

Once you own the shares outright, you will then be taxed on the dividends and will have to declare this income on your tax return. There might also be capital gains tax to pay when you sell the shares.

Word of warning..... 000's of people in share schemes have lost a fortune in the last couple of years - particularly if you work in a bank!

Always a good idea to diversify your portfolio, sell some of your shares and invest in other things. Also you can use the money to buy tax efficient investments such as ISAs.

Good luck

R.

unsaltedrhino

Thanks for the reply Rafter.

Dividends are just proceeds from the sale right? Or are they the difference in buy/sell price? I've never done a tax return as I've always been on PAYE so how do I go about declaring these earnings?