Do I pay income tax on shares employer gives me?

BBWonderbot

Hiya,

4 years ago, my company decided to give every employee in the company 7 shares each. The shares have just vested and we are now allowed to sell them. However we only have 4 available to sell due to 'taxes due on vesting due to local regulatory requirements'. I have never received shares before and wonder if someone can explain what this taxation is? Is it just income tax? or something else?

thanks in advance for any help!!

Vortigern

BBWonderbot wrote: »

4 years ago, my company decided to give every employee in the company 7 shares each. The shares have just vested and we are now allowed to sell them. However we only have 4 available to sell due to 'taxes due on vesting due to local regulatory requirements'. I have never received shares before and wonder if someone can explain what this taxation is? Is it just income tax? or something else?

Giving you free shares is a sort of payment-in-kind. If you'd been given the equivalent cash through payroll you'd have had to pay income tax and national insurance on it.

You need to keep the shares in the scheme for 5 years to avoid paying the income tax and NI that you've avoided.

Could it be that 4 of your shares have been in the scheme long enough to be tax-free, but the other 3 have not?

https://www.gov.uk/tax-employee-share-schemes/share-incentive-plans-sips

I'm not sure what they mean by "local regulatory requirements".
Is your employer a UK company? Are you a UK taxpayer?

Your HR people should be able to answer your questions.

BBWonderbot

thanks for this. I am a UK tax payer and my employer is a UK company, however the 'big boss' company is an American company. so I suspect we have been given the shares after a timeframe that suits the US tax rules, not the UK tax rules.

Spidernick

Welcome to the boards.

Are these the IBM centenary shares by any chance? The other three shares are likely to be to cover the income tax due, but your employer should have some general literature explaining things for you. There are many different types of ways shares are given to employees and we don't have enough data to comment, which is why the employer is the best bet.

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buglawton

Ensure that you complete the online forms with the US tax authorities so as not to have any share value withheld over there. Think the form is W-8BEN

Lakeuk

Strange that they are withholding shares to pay tax, I don't know about your shares or company but when I've been given shares I've paid tax through PAYE on the sales proceeds or if I've not sold I've paid tax through PAYE on the value at the point of transfer of ownership to me.

buglawton

"Taxes due on vesting due to local regulatory requirements" looks like a mistake, perhaps OP did not complete the tax exemption declaration by the deadline?
Unless OP lived in the US before.

ratechaser

Lakeuk wrote: »

Strange that they are withholding shares to pay tax, I don't know about your shares or company but when I've been given shares I've paid tax through PAYE on the sales proceeds or if I've not sold I've paid tax through PAYE on the value at the point of transfer of ownership to me.

That's how my last employer worked it as well, in some ways it's the least painful way of paying the tax due on vesting, especially if you were not planning to sell the shares immediately.