Employee Share Incentive Plan (SIP) - taxation after redundancy

2chairs · 18 January 2024 at 2:11PM

Hi, I'm looking for some help. I had a share incentive plan (SIP) with my employer (I made monthly contributions and was given matching shares and dividend shares) from 2015 but was made redundant in 2020. As such I understand there was no income or other tax to pay at the time of my redundancy. I'm now thinking of selling some of the shares but am a bit confused as to whether they would be subject to Capital Gains Tax and if so what the base cost I should use for the shares is (is it the market value at the date of my redundancy)? Unfortunately, my ex-employer has never provided much information or help with this scheme and I'm finding the government website a bit confusing. Any advice will be gratefully received! many thanks

eskbanker · 18 January 2024 at 2:15PM

The base cost for CGT purposes is the date of acquisition, so hopefully you'll have kept adequate records to support a calculation from that....

jaypers · 18 January 2024 at 5:45PM

If they are sold from within the scheme they are exempt from CGT. As it was 2020, I presume that you have transferred them to a broker account, at which point they become liable to CGT rules. I’m not sure how the calculation works though and whether it is the difference in price between transfer date and now, or the original purchase price etc.

Somerset_Alan · 19 July at 5:05PM

Your guesses were correct. While they are in the SIP they are exempt from CGT, and also from Income Tax and NI, provided they were kept in the scheme for at least 5 years. When you were forced to leave the scheme due to redundancy, they receive special treatment and even if you had not been in the scheme for 5 years you have no Income Tax or NI liability. They become liable to CGT on leaving the scheme, and the base value for the purposes of calculating any gain is taken to be the market value on the day you left the scheme. The only bit I'm not certain about, is whether this is taken as the day you were made redundant, or the day you actually transferred the shares to a nominee account in your name (because there will have been a period of grace, usually 90 days, to move them after you left the company). [I am not a financial advisor. My qualification for answering: just that I've being going through the same process of trying to understand the rules for my own SIP.]