SIP (Share Incentive Plan) Dividend Tax

Wispa16

Hello, I have been paying into a SIP for 15 ish years.  I now have enough shares that even a small dividend paid on each share means I have reached the £500 dividend tax threshold it is not a huge amount so is just a pain in the proverbial and not enough to warrant professional services.

I have shares in the SIP that are 'available' ie free of Income Tax & NI and these are the only ones I am looking at moving/selling.

I believe I can move the shares from the SIP & then into an ISA (within 90 days... a two-stage process) without triggering a CGT up to the ISA 20k limit. However, I have started looking at the shares purchased over the years and they are actually in a loss position in terms of Price Paid vs current value assuming a Section 104 holding FOR ALL shares in the SIP even those that I cannot access yet.

So my initial thought was just to minimise my tax liability on some of the dividends that are held in the SIP by moving what I could into an ISA but is there any advantage to doing it that way when I could just Bed & ISA and create a loss that could be utilised against other potential gains in the future?

Does anyone have any experience of SIP's? Thank you in anticipation

I think there will be quite a few people caught up in paying dividend tax now who are not really 'investors' but have merely put a few quid in their company SIP's. It seems a bit odd that they have created these schemes encouraging investment in the company you work for by giving a 'tax advantage' on one hand only to take it back with the other.... the admin for most employees will not be worth the hassle. 

 

Mark_d

I was in a SIP with a previous employer.  I chose the sell the 'available' shares and rather than re-purchasing them in an ISA, I chose to invest differently.  This (1) reduced my dependency on the business employing me and (2) allowed me to invest where I saw best potential for a return on my investment.

More_complicated_than_that

Wispa16 said:

... I have started looking at the shares purchased over the years and they are actually in a loss position in terms of Price Paid vs current value assuming a Section 104 holding FOR ALL shares in the SIP even those that I cannot access yet.

So my initial thought was just to minimise my tax liability on some of the dividends that are held in the SIP by moving what I could into an ISA but is there any advantage to doing it that way when I could just Bed & ISA and create a loss that could be utilised against other potential gains in the future? 

There is no s104 holding for shares held in a SIP. 

Assuming you've held the shares you take out for five years (so there is no income txa on taking them out), you are treating as acquiring them on the date they come out of the SIP trust for their market value on that day.  So there can never be a loss unless the shares fall in value after you take them out (subject to what the various matching rules say).

 Wispa16 said:

 It seems a bit odd that they have created these schemes encouraging investment in the company you work for by giving a 'tax advantage' on one hand only to take it back with the other.... the admin for most employees will not be worth the hassle. 

When the SIP was designed, the concept of "dividend shares" was included.  If the employer allows it, dividends can be reinvested tax-free in the SIP trust.  But if you take them out within three years (*) then they will be subject to income tax. (* terms and conditions apply).