Charged Tax and NI on Sharesave Scheme

ML420cdi

Paid £150pm for 2 years with the initial plan of running it for 5 years.

Had a financial disaster and am cashing it in early, I'm being taxed at 40% and having to pay NI as well...the shares have made no profit.

Can I claim this tax back from the tax office?

eskbanker

I can't see why you'd be able to reclaim anything - if the monthly payment was being handled as a deduction from your gross salary, then cashing it in early effectively reinstates the £3600 as income from your employer and would be taxed in the normal way.  What do the scheme rules say about this scenario?

ML420cdi

The £150 is deducted from net salary not gross.

So on the left hand side of my payslip I see my gross salary, on the right I see tax deductions and NI etc and also see the £150pm....so I'm paying for these net right?

eskbanker

ML420cdi said:

The £150 is deducted from net salary not gross.

So on the left hand side of my payslip I see my gross salary, on the right I see tax deductions and NI etc and also see the £150pm....so I'm paying for these net right?

I don't believe that's the implication - how would you expect it to be shown if deducted from gross?

The image seems to confirm that withdrawals within five years will be subject to tax and NI, but do the rules explain the basis on which the salary deductions are made?  You should be able to work it out via salary calculators, or get clarification from your payroll department....

MDMD

This doesn’t look like a sharesave (usually this applies to SAYE plans).

This will be probably a share incentive plan, which is deducted from gross salary and tax free so long as you kept for the whole period. 

https://www.gov.uk/tax-employee-share-schemes/share-incentive-plans-sips

If you cash in early it’s fully taxable as cash warnings.

ML420cdi

Yeah probably Sharesave...I think its called ESP...need to check...if the deductions were tax efficient or gross I would expect to see the £150 on the left side of my payslip...then the remainder would be taxed/NI deducted on the right side....but the £150 deduction appears on the right side...so I thought I was being taxed twice?...and at 40%?!...

eskbanker

There's no universal standard format for payslips, but it's common to have one column for pay and another for deductions, but that doesn't imply that deductions listed below the tax/NI lines are actually from net pay!  As you've accepted, you need to do some checking yourself....

masonic

This is one of the risks of such schemes. If you cash in early, you reinstate income in one lump sum instead of spread out over multiple tax years, so you can end up paying more tax than if you never invested. Initial deductions would have been via salary sacrifice / gross pay. That is why early repayment is subject to income tax + NI.

Reckless_Saving

Looking at E.ON’s scheme that uses the same terminology you’ve given, it’s funded from pre-tax salary so the tax arrangement you’ll currently facing sounds correct.

Q1. What is the E.ON UK Share Incentive Plan?

A1. The E.ON UK Share Incentive Plan is a HM Revenue and Customs approved share plan that allows employees to buy shares in E.ON SE out of their pre-tax salary (Partnership Shares) and receive additional shares (Matching Shares), which E.ON UK plc may award in respect of any Partnership Shares purchased.

jaypers

Sharesave - Deductions are from net pay. No tax advantage.
Share Incentive Plan - Deductions from gross pay, so free of tax and NI. There are clear time stipulations so if you cash in early the tax and NI is payable.