Share Options/ISA/Tax??

mikec31_2

Can anyone tell me the tax implications of putting some of the shares which I execute from a company share option scheme straight into an ISA. Will I save myself Income tax/CGT or will the profit I make on the shares be taxed when I finally sell? I'm single and a higher rate tax payer.

dunstonh

By sticking them in the ISA you will save higher rate tax on the dividends and avoid any liability for CGT. Whether it is worth it will depend on the size of the holding, the growth potential of the shares and the length of time you intend to hold onto them versus the charges for holding them in a self select ISA.

mikec31_2

thanks...but will I not be liable to pay income tax/NI at the moment when I excercise the options? I've got 13,000 options at £1.00 and a current share price of £3.90.

Debt_Free_Chick

mikec31 wrote:

thanks...but will I not be liable to pay income tax/NI at the moment when I excercise the options? I've got 13,000 options at £1.00 and a current share price of £3.90.

Depends on the terms of the share scheme - you'll need to read the booklet or any other information provided by the company. But it won't be income tax, it'll be capital gains tax.

And, of course, you won't be able to get that little lot into an ISA due to the annual contribution limit.

dunstonh

In the case of a savings-related share option scheme, you must make the transfer within 90 days of your exercise of an option. In the case of an approved profit sharing scheme, you must make the transfer within 90 days from the day on which you direct the trustees to transfer the shares to you or, if earlier, the day on which the shares are released from the scheme. In the case of an approved employee share ownership plan, you must make the transfer within 90 days after the shares ceased to be subject to the plan.

However, you can only utilise your £7000 ISA allowance. The remainder cannot be transferred (used to be able to but Gordon Brown stopped that). You could sell some each year to utilise your CGT allowance and gradually avoid CGT over the years. However, those shares held onto outside of the ISA will give you a higher rate tax liaiblity on the dividends.

If it is a maturing scheme, you shouldnt have to pay any national insurance.


edit: started typing before DFCs response above. hence overlap in information.