Query regarding sale of shares and CGT

elgaz

For the past 5.5 years I have been involved in a company share scheme where I buy £125 of shares per month (automatically deducted from my salary) and my employers match this. So in effect, I am increasing the shares by £250 worth every month.

The total value of my shares sits at £16k or thereabouts, based on our company's current share value of 190.50p. This value has fluctuated greatly over the last few years from as low as 101p to as high as 352p. If it rises again in the near future and my total share value increased to over £22k or more, I think I would like to sell these shares off as I have another investment in mind which I am free to try out anytime.

However, I'm slightly confused by the tax issues arising from this. I'd be grateful if anyone can advise -

- What % rate of CGT is applicable to my shares?
- I've read about a £9200 CGT exemption limit, how does this work?
- I've also read that if the income from the shares is transferred into another asset, there is no CGT to be paid - again, how does this work? What constitutes an 'asset'?

Bit of a newbie to shares, so thanks in advance for any advice.

Paul

KenC_3

18% is payable on any gain above the annual exempt limit. Calculate the net gain and deduct the limit.

The rollover relief is restricted to very few other investments, VCTs spring to mind.

Remember that if you are married you can transfer assets to your spouse free of CGT. Both of you have an annual exemption limit. Another consideration would be to split the sale with part before 5th April and part after. That way you can utilise two exemption limits.

anselld

You need to read the scheme documentation.

If it is an approved Company Share Incentive Plan (SIP) it will be exempt from CGT and Income Tax provided you hold the shares for the designated time.

PS £125 per month limit with matching shares sounds like a SIP to me. Do you buy these from gross salary (before tax deductions)?

elgaz

Thanks for your reponses.

Yes, it is an approved Company SIP and any shares bought after the initial 5yr period are tax-free. However, I was confused about the 5yrs worth of shares which I will be taxed on.

So if my shares cost me £15k so far, and I sell them for £20k, I have a £5k gain. Is there any tax applicable to this given that it falls under the £9200 exemption limit?

anselld

It will probably depend on the reason for selling.
If you are leaving for another job or you just decide to sell before the 5y period you will probably be liable for income tax and NI on the purchase cost (ie that which you avoided when buying the shares).
You may also forfeit the relevant matching shares.
I doubt there will be any CGT.

If you are being made redundant you will proably keep the lot with no tax.

However, your scheme may vary. Don't you have the brochure?

elgaz

I'll dig the brochure out, it's in my desk at work. Thanks for your advice

anselld

elgaz wrote: »

I'll dig the brochure out, it's in my desk at work. Thanks for your advice

No problem. Im sure you will find the scheme is designed to be fairly punitive to you selling within the 5 years.

That is why it is an Incentive Plan, ie it is designed to incentivise you to stay in the scheme (and hence the Company).