Work sharesave VS CGT

geordie_ben

I'm a bit confused with the CGT rules when it comes to my sharesave at work

I've agreed to buy the shares at one price, the price now is much higher, almost triple the value :T:T:T

They'll be worth over £11,000 - will I need to pay CGT at that point or does it just come into play when I sell them?

I've started reading up on S&S ISAs but I'm not sure I'll benefit with being a normal tax payer

Vortigern

You don't pay CGT until you sell your shares.

You can avoid CGT by putting the shares in an ISA as soon as they come out of the sharesave scheme.

https://www.gov.uk/tax-employee-share-schemes/save-as-you-earn-saye

geordie_ben

Thanks for that

If I only sold some of them and wouldn't make over £11,000 for that one sale, would it still be worth it?

geordie_ben

Thinking about it, say the shares are worth £5 each when the share save matures, they'd need to jump to £9 when I come to sell them for me to make £11,000

I doubt that's going to happen any time soon

Keep_pedalling

If the shares are now worth just over £11k then the gain (approx £7300) is less than your annual allowance so provided you have not made big gains elsewhere then there there is no CGT to pay.

geordie_ben

But is there a gain, as technically I'm buying the shares at a higher price on the day, but just not paying the full price for them?

Wouldn't the gain just be when I come to sell them?

Jsscmm

For share save the 'buy' price is the starting figure, I.e. The figure before the 3x growth in this example.

The sell price is whatever you actually get once you choose to sell.

The capital gain is the difference between these.

You get an allowance each year, so if all gains in one year are less than this allowance, there is no extra tax. Selling in multiple tranches does make any difference in this reguard... What matters is the gain in a tax year.

From memory, the cgt allowance is around 11k currently, but please check before taking my word for it.

geordie_ben

So... I had the option to buy them at 201p, they're now 570p, and the sharesave matures this summer.

When the shares are put into my name they'll be around the the 570 mark

I won't be selling them just yet

Will any CGT be payable when they transfer into my name when the share save matures? or is it just when I come to sell them?

chris_m

geordie_ben wrote: »

Will any CGT be payable when they transfer into my name when the share save matures? or is it just when I come to sell them?

No CGT upon transfer into your name, just when you sell them - unless you squirrel them away in an ISA within 90 days of receiving them.

geordie_ben

chris_m wrote: »

No CGT upon transfer into your name, just when you sell them - unless you squirrel them away in an ISA within 90 days of receiving them.

Something I should be aware of?

bowlhead99

You will be using your matured sharesave money to buy something that's 'worth' 570p for only £201p. So if your maturing sharesave has £4,020 in it, you will get 2000 shares and those shares will immediately be worth £11,400 and have only cost you £4020.

Simply buying them does not mean you have any tax to pay, because you haven't made a capital gain. You make a capital gain when you sell something for more than you paid for it.

When you use the sharesave money to buy them at the option price, you have not done the 'sell something' part of the trade, so there can't be a gain. It might be that you eventually sell them at under 2 quid each, and actually make a loss.

If you sell one share at £5.70, you will make £3.69 profit on that one share because you bought it for £2.01. If you sell 1000 shares, you will make £3690 profit. But if you had 4000 shares and sold them this year for prices similar to their current price, or if you perhaps have 2000 shares that you eventually sell for a tenner each, you would make enough profit to go over the allowance of how much capital gain you can make in one tax year without paying tax.

It may be that you have no tax to pay because the amount of value you have means you couldn't make enough profit to go over that annual allowance, unless they grew in value a lot. If tax is a concern, then to avoid tax, sell them before they become too expensive, sell them spread over multiple tax years, or put some or all of them into an ISA if they will fit in your current year ISA allowance.

geordie_ben wrote: »

Originally Posted by chris_m
No CGT upon transfer into your name, just when you sell them - unless you squirrel them away in an ISA within 90 days of receiving them.

Something I should be aware of?

Maturing share scheme is the only time you can move shares into an ISA without it counting as a sale at market price - and then you can sell whenever you like from inside the protective ISA wrapper, without worrying about gains or losses. You have 90 days to use this facility and it will 'use up' as much of this year's ISA allowance as the shares are now worth, when you put them in. Depending on the amounts you get, you might for example decide to put 1000 shares in the ISA for the long term and sell 1000 shares outside the ISA. No tax to pay on the 1000 outside the ISA (because well under the limit, making only £3690 of profit on them against your £2010 purchase price) and then on the ones that stay in the ISA you could sell them for £5k or £15k or £50k and HMRC would not care one bit, as sales inside ISA are invisible to the taxman.