Sharesave and tax rules

bitsandbobs

I took redundancy in May and because i left through redundancy i can take my full save as you earn sharesave in november as i have paid in 6 extra payments since i left.

I will have paid in out of my own money just over £6000 and at todays price i would get back £15,295 (for selling the shares).

Im just wondering where i stand on tax, if im right in my thinking i have capital gains tax allowance of just over £10,000 so my profit would be £9295 and thus fall within this. However i read something about it is different if you own another property or something like that. I own a third of my mothers house and get a rental income of £2160 a year which i pay tax on through my wages.

So slightly confused where this will leave me regarding tax. Have tried reading up on it and i think im ok as im under the capital gains but dont want to fall foul of the taxman

george4064

Not sure how it exactly works, but isn't it possible to deliver the shares you've obtained through sharesave directly into your S&S ISA?

If they are sold within an ISA, there will be no tax.

chris_m

george4064 wrote: »

Not sure how it exactly works, but isn't it possible to deliver the shares you've obtained through sharesave directly into your S&S ISA?
If they are sold within an ISA, there will be no tax.

If transfer direct into an ISA is not one of the options that your Sharesave administrators offer, you can still transfer the shares into an ISA within 90 days of appropriation without the need for a disposal and repurchase.

In that instance you would need to ask the administrators for a Letter of Appropration that you can send to your ISA provider, along with the transfer documents, as proof that the shares came from a Sharesave scheme and the date upon which they were allocated to you.

This method has worked fine for me for the last few schemes that have matured during my employment. I have a similar situation to the OPs coming up because I'm retiring at the end of the month and have two schemes still running - although I will not be making the extra payments, simply exercising my options using the savings accrued to the date I leave.

If the OP does want to sell the shares, simply owning a property does not cause a CGT liability, only selling it would do that.

bitsandbobs

To simplify my question a bit

Im going to sell the shares as soon as i get them. I think i will make a profit of about £9,500

Will my capital gains tax allowance save me paying tax on this profit?

Vortigern

bitsandbobs wrote: »

To simplify my question a bit

Im going to sell the shares as soon as i get them. I think i will make a profit of about £9,500

Will my capital gains tax allowance save me paying tax on this profit?

Yes, it will - assuming you make no other taxable capital gains during the same tax year.

george4064

chris_m wrote: »

If transfer direct into an ISA is not one of the options that your Sharesave administrators offer, you can still transfer the shares into an ISA within 90 days of appropriation without the need for a disposal and repurchase.

In that instance you would need to ask the administrators for a Letter of Appropration that you can send to your ISA provider, along with the transfer documents, as proof that the shares came from a Sharesave scheme and the date upon which they were allocated to you.

This method has worked fine for me for the last few schemes that have matured during my employment. I have a similar situation to the OPs coming up because I'm retiring at the end of the month and have two schemes still running - although I will not be making the extra payments, simply exercising my options using the savings accrued to the date I leave.

If the OP does want to sell the shares, simply owning a property does not cause a CGT liability, only selling it would do that.

Thanks for your response.

Do most share save schemes offer direct delivery (ie no Bed and ISA) of the shares into an ISA?

Should I contact the share save scheme company and my ISA provider in advance to check and to arrange the transfer in advance?

How are the share save scheme shares calculated to count as an ISA contribution to the total ISA allowance?

Krash420

Hi, there seems to be a bit of confusion here... Were your shares in your companies share incentive plan? If so, did you pay for them with your gross salary?

If so then the shares are actually tax free, both income and capital gains tax. Shares in a SIP wrapper do not incur ANY capital gains whilst in that wrapper, though you can only purchase £1800 of these shares a year.

After your holding period ends, you can sell them, but you pay tax at the lower of the current share price or the share price you purchased them at. This is usually three years from date of purchase (the end of the holding period).

After 5 years they become fully tax free, meaning if a basic rate tax payer bought £1000 worth of shares, his net salary only decreases by £800 and after five years gets it fully tax free. For higher rate, you only really pay £600 for it. They're mostly for people thinking longer term.

As you were made redundant, they'll be made fully tax free regardless of term you've held them, and given how much they've grown in value, thats a good thing. You can move them to your own shareplan, but then capital gains will count from your transfer value to your sell value. Depending on the company, and your financial circumstances, its fine to just sell them and get an instant tax free windfull.

So just to reiterate, you do not pay capital gains, in fact you do not even use your capital gains allowance.

Read this for more info: https://www.gov.uk/tax-employee-share-schemes/share-incentive-plans-sips

Vortigern

Krash420 wrote: »

Hi, there seems to be a bit of confusion here... Were your shares in your companies share incentive plan?

No confusion at all. The OP refers specifically to share save schemes and not to share incentive plans.

So, while what you say about SIPs is true, it's not relevant here...

... and perhaps introduces some confusion!

george4064

Yep, definitely talking about share save scheme/SAYE here

Vortigern

george4064 wrote: »

Do most share save schemes offer direct delivery (ie no Bed and ISA) of the shares into an ISA?

The scheme will possibly try to push you towards their favoured ISA provider, but you have the option to go elsewhere.

Should I contact the share save scheme company and my ISA provider in advance to check and to arrange the transfer in advance?

No need to arrange anything in advance; you have 90 days in which to do the transfer. How to do the transfer is detailed at the broker site linked below. Other brokers have similar procedures.

http://www.tddirectinvesting.co.uk/help/faqquestions/how-can-i-transfer-shares-into-my-isa/

How are the share save scheme shares calculated to count as an ISA contribution to the total ISA allowance?

The share value at the date of transfer to the ISA must fit within your ISA allowance for the tax year.

PeacefulWaters

Your rental income is subject to income tax, not capital chains tax. The property only comes into play if you sell your share at a profit.

You can avoid CGT by:

1) Using a stocks and shares ISA
2) Keeping your total gains for the tax year below £11k.

The latter can be done by holding some of the shares until after the 6th April or transferring them to whoever you're married to.