Shares and Capital Gains

btz_btz

Hi
I've been trying to get my head around this with little success. I'm in a few share schemes in my work, a sharesave account which matured last year and I sold the shares for around £11k last July. I also have a CSOP which is about to mature which after paying for the shares I should make a gain of around £7.5k.
From a capital gains perspective I think it's fairly straight forward in terms of what I'll need to pay in tax, £18.5k - £12,300 personal allowance  = £6,200 / 20% (higher rate).
I've read that I can transfer the gains into an ISA within 90 days so that will exempt me from tax? Is that correct and if yes, how long does it need to stay in the ISA?
I've also read that I can transfer the shares to my wife, is that also true and is it the shares or gains you would transfer?

Malthusian

I've read that I can transfer the gains into an ISA within 90 days so that will exempt me from tax?

No. You need a better source of tax information.

You can roll capital gains into an EIS but that is a very different level of tax planning and unsuitable for most people due to the likelihood of losing far more money than you would lose by paying the tax bill. (It also doesn't exempt you from tax - the gains are rolled over, not relieved, so if you sell the EIS shares the CGT bill comes back again.)

I've also read that I can transfer the shares to my wife, is that also true and is it the shares or gains you would transfer?

Yes. If you transfer the shares to your wife there is no CGT bill and she inherits the original base costs. So it's and, not or - if you transfer the shares to a spouse you transfer the gains with them.

So if you will both have your full allowances for 2020 / 21 available, you could transfer half the shares to her and sell the lot without a CGT bill, as the total gains would fall within your combined allowances. *edit* I forgot that you already sold one lot of shares in July - so this would have been in 2019 / 20 and just within your allowance?

btz_btz

Malthusian said:

 I forgot that you already sold one lot of shares in July - so this would have been in 2019 / 20 and just within your allowance?

Sorry yes, the ones sold in July come under my 2019/2020 allowance and the ones this month would be 2020/2021 so both under my allowance? If I sold more shares in July this year they would come under 2020/2021 and it would then be those ones I would want to transfer to my wife?

bowlhead99

Malthusian said:

I've read that I can transfer the gains into an ISA within 90 days so that will exempt me from tax?

No. You need a better source of tax information.

You can roll capital gains into an EIS but that is a very different level of tax planning and unsuitable for most people due to the likelihood of losing far more money than you would lose by paying the tax bill. (It also doesn't exempt you from tax - the gains are rolled over, not relieved, so if you sell the EIS shares the CGT bill comes back again.)

Malthusian, you have misread the post - it was not about transferring the gains into an EIS investment (which is a means of deferring gains); it was about transferring into an ISA.

You are right that btz_btz is mistaken on how to calculate gains, and that you can 'transfer the gains into an ISA within 90 days'. What you can do is transfer matured sharesave scheme shares into an ISA within 90 days of you acquiring them (up to a value of whatever unused ISA subscription allowance you have left for the tax year, £20k if you haven't used any). And then when you sell those £20k of shares inside the ISA, you will not pay tax on any gains made, because shares sold inside an ISA are outside the scope of capital gains tax.

However, shares coming from a CSOP scheme do not qualify for this 'move the shares into an ISA before selling them and avoid CGT' treatment. That's only available for employees who acquire shares from a tax-advantaged all-employee share scheme (i.e. Approved Profit Sharing scheme, SAYE Share Option Scheme, or Share Incentive Plan).  ISA managers can't accept shares from tax-advantaged discretionary share option schemes that all employees of the company don't get to participate in (i.e. Company Share Option Plans and Enterprise Management Incentives are not open to all, so can't qualify).

Based on the information provided by btz_btz:

-In the tax year 2019/20 , there were some shares acquired through a sharesave scheme. They were sold for £11.5k. They were not transferred to an ISA before selling, like they could have been, so the gain is taxable. However if the sales proceeds were £11.5k then the gains made on the sale could not have been as much as £11.5k because the shares must have cost something. As the capital gain annual exemption is £12,000 there wouldn't be any capital gains tax to pay on any of these gains because they would be exempt, assuming no other shares or investments were sold in 2019/20.

- In the tax year 2020/21 there is a CSOP scheme about to mature. This will make a gain of £7.5k.  This gain would be taxable and there is nothing you can do to make it not-taxable (other than simply not selling, and therefore not making the gain), but as £7.5k is less than the 2020/21 annual exemption of £12300 (the exemption rose slightly from last year) it would be exempt, leaving £4.8k of annual exemption not yet used.

- if there are other shares not yet sold that you currently hold and might want to sell in the current year 20/21, would make sense to transfer some to spouse so she makes the gain instead of you, because that's a whole other annual exemption available.

- if there is another sharesave maturing later in 2020/21, be aware you will not have much exemption left to play with for this tax year having used up £7.5k of it already when cashing in the CSOP options (and maybe more if the company share price improves before maturity and sale, who knows, given the unstable stock market conditions at the moment). You should think ahead and if you have a sharesave scheme maturing, consider that it can be useful to keep your 2020/21 ISA allowance unused so that you have capacity to move new maturing sharescheme shares into it and avoid paying any CGT when you dispose of them. 

Malthusian

I read the post correctly but didn't know about rolling sharesave gains into an ISA, and so assumed (incorrectly) the OP had read something about EIS capital gains rollover relief. Thanks Bowlhead.