Transfer SIP to an ISA, income tax?

escoman990

Hi,

I currently have £1200 in a SIP with my employer. If I take this money out of the plan (within five years), I will have to pay income tax and national insurance. From what I understand, it is possible to transfer this money to a S&S ISA. Will I still have to pay income tax and national insurance when I make this transfer?

Does anyone know of any S&S ISA providers that accept transfers?

My research tells me that I wouldn't have to pay income tax/national insurance but it seems too easy of a way to avoid paying it?

Thanks for any help.

Archi_Bald

Search for 'Share Incentive Plan' in https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/375474/isa-guidance-notes.pdf

escoman990

Thanks, I've had a look but can't really find an answer to what I'm looking...

jem16

escoman990 wrote: »

Thanks, I've had a look but can't really find an answer to what I'm looking...

Look at section 6.19.

escoman990

I've read everything from section 6.19 onwards about subscription by transfer of shares. I understand I am able to transfer from my SIP to a S&S ISA but there's still nothing about whether I would have to pay income tax or national insurance on a transfer. Or am I just missing something?

jem16

escoman990 wrote: »

I've read everything from section 6.19 onwards about subscription by transfer of shares. I understand I am able to transfer from my SIP to a S&S ISA but there's still nothing about whether I would have to pay income tax or national insurance on a transfer. Or am I just missing something?

Income tax and NI don't usually come into it. It's usually Capital Gains Tax if you have to sell the shares and then rebuy in the ISA.

Look at this article - it's more the comments at the bottom that would apply so scroll down.

http://monevator.com/annual-isa-allowance/

RASKOLNIKOV967

Not sure if this is helpful, but I also have a Share Incentive Plan (SIP) with my employer & my understanding of the tax & NI is that it all depends on what you do choose to do:

1. If there are any shares in the SIP which have been there for more than 5 years, you can release these shares from the Plan (if you want to) & receive a share certificate when you do so. You then have 90 days from the release date to transfer these shares into an ISA.

2. If there are any shares in the SIP which have been there for less than 5 years, you can cash some of these in - although I believe it's dependent on the different types of shares you have (partnership and matching shares) & you may lose some matching shares. Any of these shares that are cashed in will be received via your normal payslip & the cash will be subject to tax & NI in the same way as your salary. It would effectively just be additional salary. You can then transfer this into an ISA, but it would just be the same as a normal ISA contribution from your take-home pay.


These are the options I've been given by my Plan's admnistrator, Yorkshire Building Society.


If I've understood correctly, then you're considering option 2 which means the cash will automatically be subject to tax & NI.

escoman990

Thank you very much, makes sense and helps a lot!