Tax on Shares

mondaytuesday

Hi All

Hope you can help. My dad gave me some M&S shares (10280 of them).

The certificate says "the number of fully paid ordinary shares of 25 pence each blah blah). I really dont think he bought them for 25 pence each - so I'm not really sure what that means.

But anyway, we need to cash them in soon. We're gonna do some before April 5 and some after to save on tax.
But how much is the tax likely to be? Does anyone know? Am I likely to pay 40% on the profit per share? Could I lose like 10k in tax?

Many thanks and kind regards
Katie

tom188

25p is the nominal value of the share, this is not linked to the price paid for it but just a way the company calculates its share capital.

You will be charged up to 40% cgt on the profit made on the shares since they came into your ownership, subject to the cgt allowance. Inheritance tax could also potentially be an issue for 7 years after the shares were gifted to you.

EdInvestor

MKS shares are worth 6.83 each at the moment so that's a nice gift, worth more than 70k

The CGT allowance is 8,800 this year (each) and 9,200 each next year. So you'll only be able to sell around half of them without paying tax.

Can you take the rest out over the next 2 years?

mondaytuesday

Thanks Tom188
Does that mean that I only pay the tax on the profit since my dad gave them to me? i.e. He gave me them in September 06 (current share price was 610). Each share is now worth 6.80.
So would I pay 40% tax on 0.70 pence x the 10280 shares that I have? Which is about £4300.
Thank you, Katie

cheerfulcat

Does that mean that I only pay the tax on the profit since my dad gave them to me?

Yes. Worth bearing in mind that he might have been liable to CGT when he gave you the shares, as the gift counts as a disposal...

So would I pay 40% tax on 0.70 pence x the 10280 shares that I have? Which is about £4300.

GCT rates depend on your income. If you are a non- or basic rate taxpayer your CGT rate will be 10% or 20% - more info here.

Johnhowell

mondaytuesday wrote: »

Thanks Tom188
Does that mean that I only pay the tax on the profit since my dad gave them to me? i.e. He gave me them in September 06 (current share price was 610). Each share is now worth 6.80.
So would I pay 40% tax on 0.70 pence x the 10280 shares that I have? Which is about £4300.
Thank you, Katie

Katie,
10280 x £0.70 = £7196 gain, which is less than the CGT allowance as stated above. So NO tax to pay, for you anyway. This also assumes that you have not made any other Capital gains during this Tax Year (April 2006 - April 2007)

The share sale price would have to be over £6.95 before you would be liable to CGT - also take into account any cost incurred (i.e. broker fee, etc.)

John

Chrismaths

And that if you want to be on the safe side, you could sell half now, and half in the new tax year - 6 April.

cheerfulcat

CM, Katie has already said that this is her plan.

We're gonna do some before April 5 and some after to save on tax.

Katie, one other thing; make sure that your disposals in any one year come to less than four times the CGT exemption as otherwise you may have to notify HMRC, even if your gain is within your allowance.

mondaytuesday

Thank you all.
But what does 'disposals' mean?! I am a full time mum now and have been for 2 years - so I no longer pay tax as I dont earn and I don't get benefits either - so I have nothing coming in. So I should be okay????
Thanks again

cheerfulcat

Disposals means sales ( or giving away ) of assets liable to CGT, like shares. If you sell more than 4 x the current CGT exemption ( so £35,200 for 06-07 tax year ) you may have to fill out a self-assessment form.