Work share options -> ISA?

themitch

Hi
My work share options are about to mature. The options were purchased at £4.20 and are now worth over £9 per share. I have accumulated over 1700 shares which means if I exercise my option, I should receive over £15,000 for my £7,000 investment. (very nice, thank you!)

The question is (and hope it's not a stupid question)... I assume I would be liable for 40% tax on the £15k-£7k (ie 8k profit). Could I (should I) transfer the shares over to an ISA? Would that be more tax efficient? Could I then sell them straight away out of the ISA? (I haven't used my 2012/13 allowance).

Thanks in advance.
M

Ifts

I think you are only liable to get taxed on them if you wanted to cash them in before they mature, but.......

As I understand it buying shares and selling them, you are only liable for Capital Gains Tax (CGT) on the profit part above your Annual Exempt Amount (2012/2013 CGT allowance is £10600).

http://www.hmrc.gov.uk/cgt/intro/basics.htm

http://www.hmrc.gov.uk/rates/cgt.htm

I would have thought the profit you are making is below the annual CGT allowance so you wont have to pay.

Hopefully someone more knowledgeable than me about work share options will be along soon to advise you in more detail (Ive never had work share options).

MoneySaverLog

That's my understanding too, so long as you've not made any gains in the current tax year you're able to sell £7,000 (The amount you paid) + £10,600 before CGT tax is taken.

Other things you can do legallly to avoid CGT on shares is sell another lot in the new tax year and get a new CGT allowance. You can also ISA the shares up to the annual limit (I think time limits apply on this though) and give some shares away to a partner to avoid paying CGT.

chris_m

MoneySaverLog wrote: »

You can also ISA the shares up to the annual limit (I think time limits apply on this though)

It's got to be within 90 days of exercising the option IIRC.

themitch

Thanks for the replies. Not 100% sure I understand though.

The share price option was fixed 3 yrs ago at about, £4, then I paid £200 per month automatically out of my salary into some sort of option scheme, for a 3 year term. This has now matured with £7600 (there's a bonus in there too) and 1700 shares. The share price was fixed again at £9 on 30-Nov.

I received a letter a week or so ago saying I can either exercise my option and keep the shares, exercise my option and sell my shares or not exercise the option and get my cash back.

Does the above make any difference to the CGT calculation? Should I just buy exercise the option and sell the shares?

Thanks again for your help.

Mitch

gadgetmind

themitch wrote: »

My work share options are about to mature.

Is this an approved SAYE scheme? Check your paperwork.

The options were purchased at £4.20 and are now worth over £9 per share. I have accumulated over 1700 shares which means if I exercise my option, I should receive over £15,000 for my £7,000 investment. (very nice, thank you!)

Each share has £9 - £4.20 of gain in it, so each share you sell will have a capital gain of £4.80. If you sell all 1700, your gain will be £8160, which is within your £10.6k capital gains allowance so there will be no tax to pay unless you make gains elsewhere.

Could I (should I) transfer the shares over to an ISA? Would that be more tax efficient? Could I then sell them straight away out of the ISA?

If they are approved SAYE shares, then you can transfer them into an ISA within 90 days of exercise. You will only be able to transfer £11,280 of value of shares into your ISA and it's the £9 number that's used.

This is only worth doing if you need your capital gains allowance for something else.

themitch

Perfect, thanks for clearing that up. I believe it is an approved saye scheme, although how can I tell? As the capital gains is within my allowance I will simply exercise the option and sell the stock and take the cash.

Thanks again.

gadgetmind

themitch wrote: »

I believe it is an approved saye scheme, although how can I tell?

Check your paperwork and/or ask your company. Shares can only be transferred into an ISA if it was from an SAYE scheme that we open to *ever*employee of the company.

However, it doesn't look like you need to concern yourself with this.