will i have to pay cgt

mgal

im in a works sharesave scheme. ive been in them before but without making any money (apart from what i,ve paid in)
this time it looks like i,ll make a decent profit.
after £9000 invested it may return £25000 ish
however i think i will have to pay cgt.
how much will i have to pay?
can i use my partners cgt entitlement.

thanks

jimclark1967

You'd need to let us know when the original investment was made.

Another thing to bear in mind is that if you're able to stagger cashing-in the shares over a couple of tax years you'll get the benefit of two annual CGT exemptions.

JC

Twopints

You can transfer shares to a spouse to take advantage of their CGT allowance - this is only available for spouse not unmarried partner.

I agree with jimclark1967 re using the annual CGT allowance for more than one year by spreading the disposal - this can even be e.g. on 5th April 2007 in tax year 2006/07 and 6th April 2007 in tax year 2007/08. If you go this route, be very careful with weekends and bank holidays! I think the annual allowance is currently £8,800 (per person per annum)

Edit: The Capital Gain only arises when you actually sell the shares so it's under your control to a large extent. If you only sell half the shares, you will only "realise" half of the total gain (sell shares @ £12,500, they "cost" you £4500 - the gain is £8000: within your annual CGT allowance so tax = NIL, assuming you have no other chargeable capital gains)

CGT is (roughly) charged at your highest rate of tax so if you currently pay 22% it will start at 20% - however if your gain takes your over into the next band i.e. your total taxable income (e.g. your annual pay plus the chargeable gain) goes into the higher rate band then you will pay 40% on that part that is above the 40% threshold.

:beer:

Twopints

Forgot to say: if it's a company sharesave I assume it is over 3 years(12months @ £250 x 3years), and that it is an "approved" scheme - this should be stated in your sharesave documentation. Most schemes are approved (i.e. by Inland Revenue) - if unapproved there are some different rules.

mgal

jimclark1967 wrote:

You'd need to let us know when the original investment was made.

Another thing to bear in mind is that if you're able to stagger cashing-in the shares over a couple of tax years you'll get the benefit of two annual CGT exemptions.

JC

thanks for reply.
these are corus shares and i think that when we are taken over the company (and therefore the shares?) will no longer be on the stock market.
will i still be able to cash half say in january next year and the other half in april.

wannabemoneysaver

mgal - I'm in the same boat as you I think !!!

Sharesave commenced December 2005 , over 3 years , ends Dec '08. If theres a nett profit of about £20000 :

a)Can I use my (common-law) partner's CGT allowance to minimse CGT ?

b) Would I be able to obtain loan notes to carry over into the following year, bearing in mind the company would be by that time de-listed and a private company?

Anyone got any ideas ? Asked my IFA and he doesn't know

jimbouk_2

This is my way of thinking over my shares that are about to mature please correct me if i am incorrect in my calculations

Paid £250 per month for three years commencing 01/01/2006 due to mature 01/01/2009

Accrued 4794 shares@ a sale value of £6.08 each= £29146

Less £9000 paid for the shares = £20146 liable to CGT

My plan is to transfer 2320 shares to my wife and elect to take 154 shares as loan notes.(which i will cash in in the next tax year)

by my reckoning this gives us £14105 in cash each of which £9581.61 is liable CGT , this should be tax free as the current personal limit for CGT is £9600

jimmo

You might need to tweak this a little bit.
I’m a bit rusty on this but I think that if the loan notes are QCBs your plan will work. If the loan notes are not QCBs your acquisition value will be split proportionately between the shares sold and the loan notes.
It won’t be a huge amount but if you want to avoid all tax then just lower the amount you sell this year a little.

wannabemoneysaver

I gather QCB stands for Qualifying Corporate bond ?? Theres no mention on this on the exercise documents...

I too have invested £9000 in this and with 4794 shares at £6.08, will get around £29146.

Could I take out £9000 (my outlay) plus £9146 of gain now (leaving in £11000 of loan notes).

Followed by cashing in £9000 of loan notes in Jun 2009 (new tax year ?) Then the balance of £3000 in tax year 2010/11 ?

I live with my partner (unmarried , so I don't think I can pass them over tax free) - Interest on loan notes is paid in June 2009, so better to leave in till then and collect that.

Does this work and do I miss capital gains tax ??

jimmo

The purchase price has to be divided between what you sell this year and what you retain. Its called a part disposal.
Using your own figures
The amount you take in cash, proceeds £18146 will have an original purchase price of
£9,000 * 18146 / 29146 = £5,604
The original purchase price of the loan notes will be
£9,000 * 11000 / 29146 = £3396.
This year you will have a gain of (18146-5604) £12542 and will have tax to pay.
So you need to adjust what you take in cash and what you take in loan notes and change the fractions accordingly to find your optimum result.

wannabemoneysaver

So, taking your point, am I safer to do £10K,then £10K and then the balance over the next 3 years ? Sorry if I'm sounding a bit thick...