CGT Reductions on Share Income

StoneHengeHarry

Hi folks,

Apologies for the first time post but have ended up with an unexpected financial conundrum.

I have recently recieved c£130K in share income from a stake in my employer which was sold on to a large UK national.

I am a higher rate tax payer, so all Capital Gains would be charged at 20%. My wife is a basic rate payer so would be charged at 10%.

We have no other investment/property income or losses. What is the most tax efficient way to divvy this up and make use of our £12K allowance?

Is it as simple as gifting it £118K (130-12K free) to her & having her declare the income and be taxed at 10%?

Also is there a way/a need to formally declare a transfer to my wife as a gift other than just transferring money?

All help much appreciated.

Harry

Yellow_mango

Unfortunately if the shares have already been sold you may be too late. You would have needed to transfer the shares to your wife prior to sale (so that she received the proceeds) rather than just transferring the proceeds to her after the event.

I don’t think HMRC would look kindly at any attempt to back date a transfer of shares, and the paper trail would not support this (ie the share certificates would not have been issued in her name, and the proceeds were not paid to her).

Yellow_mango

I’m assuming your stake was not large enough to qualify for entrepreneurs relief?

Pennywise

StoneHengeHarry wrote: »

Is it as simple as gifting it £118K (130-12K free) to her & having her declare the income and be taxed at 10%?

You can't do that. It's not what you do with the money that matters. If you wanted the gain to be chargeable on your wife, you needed to have transferred them into her name prior to selling them. As it stands, "YOU" sold the shares so you are liable to capital gains tax. Gifting the proceeds to your wife doesn't have any effect on that.

StoneHengeHarry

Thanks for the replies folks, much obliged even if it’s not quite the answer I had hoped for!

I’m quite young with no experience of share income & things moved very rapidly at the company so I’ll have to file this under a learning experience for next time.

So basically the best course of action would be to declare & pay the tax accordingly?

Out of interest would purchasing further assets (Property or Shares) allow me to offset the earnings?

AnotherJoe

StoneHengeHarry wrote: »

Thanks for the replies folks, much obliged even if it’s not quite the answer I had hoped for!

I’m quite young with no experience of share income & things moved very rapidly at the company so I’ll have to file this under a learning experience for next time.

So basically the best course of action would be to declare & pay the tax accordingly?
Other than fraud you mean? :eek:


Out of interest would purchasing further assets (Property or Shares) allow me to offset the earnings?

No it would not.

You could look at VCT's which have various tax features but that isn't a direct offset its just that they come with tax advantages.

You could also look, next tax year at putting the max into your pension. (because this tax year i think you'd be well over the limits but an IFA can put you right on the exact numbers)

Yellow_mango

For what it’s worth, only the first £40k or so would have been within the lower rate band for your wife too (as it would have pushed her into the higher rate band), although you’re right there would have been some savings.

Still. £130k at 20% is a pretty good windfall however you look at it :-)