Save As You Earn

RonnieCorbett

My husband has a Sharesave plan through YBS which is due to mature Sept 20. We are trying to figure out the best way of keeping this tax efficient whilst getting access to most of the money ASAP and hoping someone in the forum may be able to shed some light on our options and how we go about actually moving the money please? 

We invested £18k and upon maturity, we are looking at a total share value of £54k.
Is my husband able to do the following:

1. Withdraw the investment amount of £18k as cash
2. Withdraw £12k as cash - no tax as within the capital gains threshold?
3. Gift £12k as cash to me - no tax as within the capital gains threshold?
4. Open a Sharesave ISA and transfer £14k into it - no tax as within ISA allowance?

To do this, would he need to ask YBS for the cash, except for the ISA element which he would need to keep as shares? Is it possible to split like this?

Really grateful with any help anyone can provide as we feel a bit lost with it all!

Dox

Have you read the (extensive) information YBS provides, either as a booklet or online? There is also a facility to ask questions direct, so perhaps that's the best way to ensure you get correct answers: https://www.ybsshareplans.co.uk/employee/contact-us.html

Gadfium

RonnieCorbett said:

We invested £18k and upon maturity, we are looking at a total share value of £54k.
Is my husband able to do the following:

1. Withdraw the investment amount of £18k as cash
2. Withdraw £12k as cash - no tax as within the capital gains threshold?
3. Gift £12k as cash to me - no tax as within the capital gains threshold?
4. Open a Sharesave ISA and transfer £14k into it - no tax as within ISA allowance?

As I understand Sharesaves*, he will have to exercise the option to buy the shares. If he then sold all of those shares he would realise a profit of £36K (£54K from the sale minus the £18K invested).

CGT is payable on the profit, so if he did the above then he'd have a CGT liability on the £36K (I'm assuming no other profits from other sales within the tax year). In answer to the above points:

1. Withdraw the investment amount of £18k as cash
Why would you withdraw cash when exercising the option to buy results in profit?

2. Withdraw £12k as cash - no tax as within the capital gains threshold?
CGT is tax on profit. Again you'd be crazy to withdraw cash when the shares are so high in value.

3. Gift £12k as cash to me - no tax as within the capital gains threshold?
Same as above. Don't wihdraw any cash

4. Open a Sharesave ISA and transfer £14k into it - no tax as within ISA allowance?
See below.

To mitigate against CGT there are a couple of options. He could exercise the option to buy the shares and then have £20K of them transferred into a ISA within 90 days of the option date. Given that he has 6 months after the maturity date to exercise the option and then the 90 days to transfer, he may be able to split this across two financial years. This means that he could get £40K into ISAs leaving £14K outside.Assuming no other sales in the relevant tax year, then he could sell the shares outside the ISA without any CGT implication.  Bear in mind, he must have the ISA allowance available for that tax year AND the transfer must be done by the Sharesave trustees.

The other option is to exercise the option to purchase and then transfer some of the shares to you. You will have your own CGT allowance as well as his, so you both could sell an amount up to our CGT limit in a single year. If, for example, he transferred half of the shares to you, then each of you would have £27K of shares. That £27K contains £16K of potential profit. You could each sell roughly 2/3s of the shares, releasing £24.6K of profit which would take advantage of this years CGT allowance.

The disadvantage of Option 1 is that there's a lot of time between purchasing the shares and selling them, so you are exposed to market volatility in the interim.

Option 2 removes some of this as you can sell a big chunk of them immediately, minimizing the risk of the share value falling.

*A fixed amount is paid from payroll each month into a Sharesave account. At the end of the term he can withdraw the money or buy shares at a reduced price.