LTIP - gifting to reduce tax

Rockingfella

Hi All,

Hoping someone can help me.

I am about to be granted 3,500 shares with a current value of £7.50 per share from my employer as part of my long term incentive plan.

As I understand it I will have to pay income tax on this at the additional rate.

However, if I transfer these to my spouse who is not in paid employment am I still required to pay income tax at the additional rate on the shares?

My aim is to reduce the tax as much as possible. I am hoping that if I gift them to my wife we can make use of her personal allowance and only pay 20% on the rest but not sure if that is how it works.

Hopefully I have given enough information so please let me know if you need anything else.

Thanks! :beer:

AnotherJoe

Offhand I dont see how transferring shares to your wife would make any difference.
If you gave her £1k out of your pay packet each month that wouldnt reduce your income tax

However the ways of HMRC are vague and mysterious so i look forward to a more nuanced reply.

bowlhead99

AnotherJoe wrote: »

Offhand I dont see how transferring shares to your wife would make any difference.
If you gave her £1k out of your pay packet each month that wouldnt reduce your income tax

However the ways of HMRC are vague and mysterious so i look forward to a more nuanced reply.

Your reply makes sense to me. Presumably Rockingfella has been granted the shares as part of a long term incentive program in consideration for him working for the company in the past and hopefully in the future. So he pays income tax on the current value of what he's been given.

He could try asking the company if they would consider employing his unemployed wife at minimum wage and paying her in shares as part of a long term incentive scheme to encourage her to keep working hard for them and staying in the job for a good length of time, delivering good results in her role. As she doesn't have much other income, getting the shares wouldn't attract much tax for her. But presumably neither employer nor wife would be keen to structure the arrangement like that.

Depending on the type of scheme, it's not unheard of for someone to have their shares in their employer held by a family member, but that's usually more to do with planning around the income and growth from the shares in future, rather than trying to deny that the employee received the shares in connection with his employment and pretending that someone else earned them instead.

Rockingfella

Lol - I thought as much...

I was wondering if there was some weird an wonderful way I could reduce the tax bill.

Clever arrangement, doubt my company would go for it, hahaha.

soulsaver

I'd try the cutting tax section; not saying there's owt wrong said here but it may get more informed attention.