Large SAYE gains... help required minimising the tax

JBL2000

Hey Everyone,

I am after a bit of sensible advice. Next year I have a 5yr and a 3yr SAYE mature. The whole reason to do it was to get the mortgage paid off. The outstanding mortgage is just about the same as the value of combined SAYE's.

I was paying in £200 into the 5yr and £100 into the 3yr. The value of the shares has more than doubled. The combined value is easily going to exceed £34K. I am just about to go up into higher rate tax rate (Higher rate) so any GCT is @ 20% if that makes a difference.

What I am looking to do is how to minimise the tax (real sting at 20%). Obviously I can put £20Ks worth into an ISA tax free and then withdraw it a few weeks later. That still leaves £14K hanging about. Obviously I can't do two ISA's in one year.

Some questions I have around reducing tax...

1) How does the tax man work out tax on the gains? If I put 20K in how do they decide the profit V the money invested (if that makes sense)
2) Can I transfer the 3 yr to my wife who can have a S&S ISA with it. Does it need to stay in her name for a certain duration (We just want to cash it out and give it to the bank!)
3) If the answer to 2 is no, whats the next best way to minimise any tax owing.

Thanks!

spider42

You may be able to get more into the ISA than you think. The shares can be transferred into an ISA within 90 days of you exercising the share option. If that 90 days straddles two tax years, then you can use two years ISA allowances, in other words £40,000. So with careful timing, this should be possible.

Even if that isn't possible, if you can find a stockbroker that has a flexible ISA, and at the same time accepts SAYE transfers, then you can use the ISA flexibility to 'double dip' and transfer more than £20,000 worth of shares into it.

E.g. if the shares are still worth £34,000 when you sell them. Transfer £20,000 of shares into the flexible ISA. Sell them within the ISA, and withdraw the cash. Under flexible ISA rules, you still have £20,000 left to subscribe to the ISA. You can therefore transfer the remaining £14,000 of shares in, and still have £6,000 of your ISA allowance remaining! All of the share transfers must take place within the 90 day period.

There is a good guide here: https://equiniti.com/uk/news-and-views/eq-views/employee-share-plans-update-march-2023/ (see the SAYE/CSOP/EMI bit under the Capital Gains Tax section).

housebuyer143

I have the same predicament.

Firstly, you only pay tax on your gain, so deducted the amount you put in from your wages from the amount you receive. Then deduct the £6k allowance. 

What do you have left? That is what you need to pay CGT on and what you need to sort.

You can do the following. The

1. Excersize your option to buy some shares up to a specific limit and then arrange for the remaining to be bought and held. 
2. You can either hold them and transfer them to your ISA or you can arrange the scheme to transfer them into your wife's name and she can transfer them directly into her isa scheme. 
3. If you transfer it to yours then you need to hold them until the next tax year or your wife can dispose of them right away assuming she isn't over the CGT limit. 

That should avoid you paying any CGT. You have 90 days to move the shares into the ISA after that you need to pay tax on the transfer...

I am going to do this exact thing when mine nature this year as I'm in for a nice chunk of profit. Bare in mind the capital gains allowance reduces to £3000 from next April.