Tax on Share Sales

Dead_keen

Jamsmyth said:

Dead_keen said:

Jamsmyth said:

Would that preclude me from having my shares purchased at the 20% level?

Just checking it is not the company buying back its own shares from you?

Yeah it is the company buying back its own shares? I assume that changes the scenario?

Yes, it does. The amount you get in excess of what the shares were initially issued at will be taxed at dividend rates. The rate will be up to 38.1% depending on your other income.  This is paid by you through self assessment (which also brings payment on account issues for you for the next tax year).  

Do you think the shares are worth the amount you will get for them?  If not, there can be other tax issues if you are / were an employee. 

Dead_keen

In saying the above, I’ve assumed that the company is a UK incorporated company (or UK tax resident). If not, it gets more complicated in working out what is the right rate. 

Jeremy535897

Dead_keen said:

Jamsmyth said:

Dead_keen said:

Jamsmyth said:

Would that preclude me from having my shares purchased at the 20% level?

Just checking it is not the company buying back its own shares from you?

Yeah it is the company buying back its own shares? I assume that changes the scenario?

Yes, it does. The amount you get in excess of what the shares were initially issued at will be taxed at dividend rates. The rate will be up to 38.1% depending on your other income.  This is paid by you through self assessment (which also brings payment on account issues for you for the next tax year).  

Do you think the shares are worth the amount you will get for them?  If not, there can be other tax issues if you are / were an employee. 

It can be capital, but OP hasn't owned the shares for long enough for capital treatment to apply. Well asked!
https://www.lambert-chapman.co.uk/blog/company-purchase-shares/

Jamsmyth

Dead_keen said:

Jamsmyth said:

Dead_keen said:

Jamsmyth said:

Would that preclude me from having my shares purchased at the 20% level?

Just checking it is not the company buying back its own shares from you?

Yeah it is the company buying back its own shares? I assume that changes the scenario?

Yes, it does. The amount you get in excess of what the shares were initially issued at will be taxed at dividend rates. The rate will be up to 38.1% depending on your other income.  This is paid by you through self assessment (which also brings payment on account issues for you for the next tax year).  

Do you think the shares are worth the amount you will get for them?  If not, there can be other tax issues if you are / were an employee. 

Hi, I think the shares are justifiable in their sale price based on the company profits. I was never a direct employee but had a separate consultants contract but that was managed completely separately in terms of payments and have no direct relationship to shares. Would that matter?

Dead_keen

Jamsmyth said:

Dead_keen said:

Jamsmyth said:

Dead_keen said:

Jamsmyth said:

Would that preclude me from having my shares purchased at the 20% level?

Just checking it is not the company buying back its own shares from you?

Yeah it is the company buying back its own shares? I assume that changes the scenario?

Yes, it does. The amount you get in excess of what the shares were initially issued at will be taxed at dividend rates. The rate will be up to 38.1% depending on your other income.  This is paid by you through self assessment (which also brings payment on account issues for you for the next tax year).  

Do you think the shares are worth the amount you will get for them?  If not, there can be other tax issues if you are / were an employee. 

Hi, I think the shares are justifiable in their sale price based on the company profits. I was never a direct employee but had a separate consultants contract but that was managed completely separately in terms of payments and have no direct relationship to shares. Would that matter?

High-level: If you think that this is a fair representation of the value of the shares then the dividend tax treatment would apply (to the proceeds less subscription price).

More detailed: If the shares were worth less than what you received then they would be then the extra amount paid is likely to be taxed at normal income tax and NIC rates (so up to 45% + 2%). 

If you have an employment (e.g. with your own company) then that would have a PAYE/NIC obligation. There are then some incredibly penal rules if you didn't reimburse the PAYE reasonably promptly (even if the employer never operated PAYE). If you had an employment (e.g. again with your own company) then there can also be a PAYE/NIC obligation if (i) the shares were restricted when you acquired them and (ii) you didn't pay the unrestricted market value / make a s431 election.  Similarly, if they were convertible.

If you were self-employed, the excess is likely to be taxed as trading income (self-assessement and class 4 NIC). 

Geeky-level: There is a lot of detailed tax legislation to support the above.  It will be very fact specific.