Maximum tax free contribution?

EdSwippet

aldershot wrote: »

It was the proceeds of a cashless sale of stock options. Income tax was withheld at the highest rate which does suggest to me that it should be treated as earned income and not any form of capital gain.

Sounds like it.

Strictly, cashless sale is actually same-day exercise and sell. The difference between the grant price and the exercise price is income (for both tax and NI), and the difference between the exercise price and sale price is capital gain/loss. For same-day, the exercise price and the sale price will be exactly the same(*), so proceeds from this type of action are all income.

(*) Sometimes companies use a daily average price for one of these but not the other, so occasionally there can be a minuscule capital gain/loss. In practice, if this occurs it's often way down in the noise and can just be ignored.