Transferring sharesave shares into an ISA

Lungboy

In just over a year my wife's sharesave scheme finishes. I've just been reading up on what happens when it ends, and found out it could be hit by capital gains tax. We have zero experience of CGT so know nothing about it. The .Gov page says that this isn't paid if you transfer the shares into an ISA but to check with the ISA provider. This suggests that not all providers will accept shares like this. Is this the case? If so, is there a list of providers that will accept these shares? Finally, once the shares are in the ISA can they be sold and converted to cash straight away? Or is it that the shares are sold and it's the cash that goes into a cash isa straight away?

bowlhead99

Normally you are only allowed to put cash into an ISA -you can't put shares in without first selling to convert them to cash.

However, a maturing company share scheme is a rare exception where the shares are allowed to​ be transferred into the ISA directly, i.e. without selling them to convert into cash first, and therefore she won't have sold them outside an ISA, and therefore no CGT can be due on the shares transferred.

She can only transfer a value of shares up to her available ISA allowance - so if she's going to be doing this in just over a year's time and expects to have a large value of shares, make sure she doesn't subscribe any money into an ISA after 6 April 2018 so she has the maximum "space" available from her 2018/9 allowance (currently expected to be £20k).

As soon as the shares are sitting inside the ISA she can sell them if she likes and will then have cash sitting in her S&S ISA account alongside any of the shares she transferred in but chose not to sell. She would be free to use the proceeds to buy something else inside the ISA (eg other company shares or Investment funds), transfer the cash to a cash ISA or other type of ISA, or simply withdraw the cash to her bank account. Then there will have been no CGT on whatever she sold because all the selling was done inside the ISA.

If she has more than £20k worth that she wants to sell, she could sell some more outside the ISA and only be assessed for CGT on what she sells outside the ISA (difference between buy price and sell price) and of course she might not actually make enough gain on those shares to go much above the annual CGT exemption level.

I don't think there is a perfect and compete list of what ISA managers accept maturing share scheme transfers and you are right that they don't have to accept them if they don't want to offer that service. But most of the mainstream ones do. Obviously not someone like Nutmeg that only lets you hold their own funds and not individual company shares. However, as of now you don't know what value she'll have next year, or what providers will have what price structures for holding or selling shares in mid 2018, so there is no need to look around just yet.

When you are ready to pick an ISA manager that looks OK, if they don't mention share save schemes on their website, just send them an email and ask.

Lungboy

Thanks so much for such a detailed response. I just looked up the CGT allowance and I think she'll be able to sell the shares outright without needing the ISA, but it's very useful information.

george4064

Lungboy wrote: »

Thanks so much for such a detailed response. I just looked up the CGT allowance and I think she'll be able to sell the shares outright without needing the ISA, but it's very useful information.

If your ultimate intention is for the money to be put in an ISA, you'd be better off putting them straight in the ISA (and selling in the ISA) rather than selling outside the ISA and transferring the cash proceeds into the ISA irrespective of any CGT considerations.

For example, lets say the shares are worth £10k at the end of the sharesave scheme and it cost £6k through the regular payments. If you transfer the shares directly into the ISA it will only use up £6k of the annual ISA allowance (assume its £20k), whereas if you sold them and transferred the proceeds it would use up £10k of your ISA allowance. Therefore effectively you will be 'losing' £4k of your ISA allowance for that given tax year.

Hope that makes sense

Lungboy

That does make sense, thanks. I doubt we will be putting the money into an ISA, it's likely to be needed for other things straight away.

martinsurrey

george4064 wrote: »

For example, lets say the shares are worth £10k at the end of the sharesave scheme and it cost £6k through the regular payments. If you transfer the shares directly into the ISA it will only use up £6k of the annual ISA allowance (assume its £20k), whereas if you sold them and transferred the proceeds it would use up £10k of your ISA allowance. Therefore effectively you will be 'losing' £4k of your ISA allowance for that given tax year.

Hope that makes sense

that is wrong,

funds giude to SAYE into ISA

The ISA subscription amount is the MARKET value of the shares on the date of transfer.

So you are wrong that the OP would "lose" £4k of ISA allowance.

But you are right that you are better off transferring than selling and buying, but for a different reason.

If you transfer you keep your full CGT allowance for any other gains in the year, if you sell and re buy you will use some CGT allowance on the sale.

MallyGirl

her other option is to transfer some of her shares to you and then you can sell them under your capital gains allowance.
I had a similar situation. Had paid £9k over 3 years for shares. At maturity of ShareSave Scheme they were worth £22.5k. So profit of £13.5k. The CGT limit that year was £10,900.
I transferred £3k worth of shares to my husband. I sold my remaining ones and was under CGT, and so did he as he had no other CG that year.

george4064

martinsurrey wrote: »

that is wrong,

funds giude to SAYE into ISA

The ISA subscription amount is the MARKET value of the shares on the date of transfer.

So you are wrong that the OP would "lose" £4k of ISA allowance.

But you are right that you are better off transferring than selling and buying, but for a different reason.

If you transfer you keep your full CGT allowance for any other gains in the year, if you sell and re buy you will use some CGT allowance on the sale.

I stand corrected, thanks for pointing that out.

Here is an explanation from HMRC (point 5). https://www.gov.uk/government/publications/employee-share-and-security-schemes-and-capital-gains-tax-hs287-self-assessment-helpsheet/hs287-employee-share-and-security-schemes-and-capital-gains-tax-2017#approved-savings-related-share-option-schemes-saye-schemes

Liquidity

I have a question about this - I will have invested £15k over 5 years by Sept 2019.

The option price is less than 50% of the current price - i.e. the shares are currently likely to be worth more than £30k if all sold.

But as I've "spent" £15k on them, which value is used in terms of the ISA allowanance? The money I spent on them, or the value they would hold on the day?

Vortigern

Liquidity wrote: »

I have a question about this - I will have invested £15k over 5 years by Sept 2019.

The option price is less than 50% of the current price - i.e. the shares are currently likely to be worth more than £30k if all sold.

But as I've "spent" £15k on them, which value is used in terms of the ISA allowanance? The money I spent on them, or the value they would hold on the day?

The value they hold on the day. So you could put £20,000 worth into an ISA and sell the remaining £10,000 worth outside of the ISA but within your CGT allowance.

Liquidity

Vortigern wrote: »

The value they hold on the day. So you could put £20,000 worth into an ISA and sell the remaining £10,000 worth outside of the ISA but within your CGT allowance.

Assuming I don't want to sell any shares immediately, I guess there's no way to ever get those other shares into the ISA?