Help with CGT liability

Odessite

Hello, we are retired. Many years ago my then employers granted me some share options.

I have now exercised these on a cashless basis as we had insufficient funds to pay the exercise price per share. As I understand it, all options were exercised and issued shares are sold in the market. Part of the proceeds were used to cover the exercise price of the options for shares.

Since the exercising of options for shares is counted as income for taxation purposes, the proceeds were reduced by 20% income tax and also by NIC.

We see from the above that there are two amounts here, the GROSS and the NET. Which of these two amounts should I report on our tax return? I ask because the GROSS amount is in excess of this year's CGT limit but the net is below.

Finally, is it correct that my ex-employers should retain NIC?

Much obliged for any help or advice.

DeepSporran

Can't help I'm afraid, but suggest you repost in the Tax forum, where there are usually loads of willing experts (including retired tax inspectors) to advise you on CGT.

cloud_dog

Affraid I cannot be absolute on the below responses but from my share option expereince....

Odessite wrote: »

We see from the above that there are two amounts here, the GROSS and the NET. Which of these two amounts should I report on our tax return? I ask because the GROSS amount is in excess of this year's CGT limit but the net is below.

The GROSS / NET relate to the income element, so for CGT purposes you base it on your monetary gain, i.e. NET figure, as that is how much you have actually gained.

Odessite wrote: »

Finally, is it correct that my ex-employers should retain NIC?

Unsure of this, I thought the NIC would work its way through the system ultimately to the IR for the income you have gained from the options.

Odessite

Thanks to you both for your replies.

I wasn't aware there was a tax forum! The joys of old age!

DRS1

It sounds as if the option was an "unapproved" option - ie had no special tax treatment. You probably don't need to worry about CGT as you paid income tax on the value of the shares at the time you exercised the option less the exercise price. As you sold the shares straightaway they shouldn't have changed in value very much if at all. You would only pay CGT on any difference between the sale proceeds and the value at the date of exercise (and you will probably be covered by the annual allowance for that). You may find though that there is some additional income tax to pay if you are a higher rate tax payer.

Odessite

Thank you!

Yes, the scheme was indeed unapproved. I can see the logic now. I shall report the Gain, Tax and NIC deducted on my next tax return.

There is no need for my have to worry about additional tax - those who saved with Allied Dunbar only pay basic tax on their pensions.