selling shares

bigspender0_11

What rate of tax and NI deductions do I deduct when selling shares? The shares were free from my work and them plus my annual salary will put me over £40k. I have no spouse to transfer them to in order reduce deductions, not sure if there is any other loopholes could go through.

taxing

bigspender0_11 wrote: »

What rate of tax and NI deductions do I deduct when selling shares? The shares were free from my work and them plus my annual salary will put me over £40k. I have no spouse to transfer them to in order reduce deductions, not sure if there is any other loopholes could go through.

Possibly, not enough information here.

However, assuming you got these through one of the tax friendly schemes (and not as unapproved share options), you will be able to reduce the gain by your annual exemption for CGT which is £10,100. The net gain after this then 'sits on top' of your taxable income as the top slice for tax.

Taxable income is your pay, taxable benefits in kind, grossed up interest (that is the net you got plus the 20% tax the bank sent to the taxman) from bank accounts, grossed up share dividends (you might get dividends from these company shares??); less your annual allowance for income tax being £6475.

If the taxable income after that is less than £37,400 you get the gain taxed at 18% for the bit between your income and that £37400. If the total is more than £37400 then the part above that £37400 is taxed at 28%.

If you pay into a pension, or if you make gift aid donations to charity, the gross value of the payments you make get added to the 37400 and allow you more gains at 18%.

For instance - if you pay £80 a month from your net pay to pension - the tax man makes that up to £100 by giving the pension fund £20. (Is actually you getting 20% tax relief on a gross payment of £100 - but you get the tax relief 'instantly, so you pay £80 net of tax relief).

For tax, you have made 12 x £100 payments so £1200 but can also get more tax relief if you need to pay tax at 40%. They way this works is HMRC say you can have £37400 + £1200 = £38600 income before you start to pay either income tax at 40% or CGT at 28%.

Gift aid works the same way - you give £20 but the taxman treats it as £25 .

Regards.

bigspender0_11

The share dealer usually deducts the tax etc, should I complete a tax return to inland revenue for any rebate or do they sort automatically? I would prefer to receive a nett amount.
Last time I sold shares I was heavily taxed and when I contacted IR they said I wasn't owed any refund, maybe I should look into this again?
I don't want to go to a financial advisor or accountant as they all charge.
Thanks for any help you can give me.

Nosht

You could always hold them & gain a (small?) dividend every year from them.
Top slice,( sell some & hold some) every year & maybe stay under the tax limit.

N.

jimmo

It sounds like you have not been given shares but granted share options.
If I've got this right it seems likely that at some time in the past, when your company's shares were worth £2.36 you were granted an option to buy @ £2.36 at some time in the future.
That time in the future has arrived and you can now buy the shares @ £2.36.
Assuming the shares now have a value of £4.50 then if your share options are approved by HMRC you can buy @ £2.36 with no particular tax worries, as long as you have the cash to pay for the shares.
Then, when you sell the shares for £4.50, you will possibly have Capital Gains Tax to worry about.
However it really sounds like your share options are not approved by HMRC.
In that case when you buy the shares for £2.36 you will be liable to Income Tax and National Insurance on your "gain". That is the difference between what you pay for the shares and their value.
Also your employer is responsible for operating PAYE and taking the tax and national Insurance from you.
A very common way of doing all this is for you to both exercise the option (buy the shares) and sell them on the same day. Typically the employer arranges all this for you.
Then you buy the shares @ £2.36 and owe your employer for the shares plus the tax and National Insurance. You sell the shares for £4.50, your employer takes what you owe him and pays you your net profit.
Is that close?
Edit.
Sorry, I took those figures of £2.36 and £4.50 from another thread on a similar topic. Whilst the figures may be meaningless they still illustrate what I was trying to explain.