Sharesave Tax

[anonymous-user]

Hi,

I am in a 3 year scheme at work. £200 a month pre tax investment in a Sharesaver scheme. £7200 total investment.

Currently making good profit (up about 2 or 3k). My understanding is that if i cash in at the end of the investment term I get the 7200 tax free and then any profits are taxed.

I am a 40 percent PAYE tax payer. Will my profits get taxed 40 percent?

If i was to buy and sell stocks, spread bet or gamble outside of my employment I wouldn't pay tax, so trying to confirm!

[fat80b]

Is this an SAYE scheme?

My understanding is that for an SAYE scheme, the profits are considered as a capital gain and not income for tax purposes. Usual Cap gains tax limits apply but there are some things that you can do to mitigate this a bit.

If this is a share award outside of the SAYE scheme, then profits here are considered as income and taxed at the 40% level if applicable.

At least, this is the way it has worked for me.

Bob

[Claudia Skies]

If you have a big gain on SAYE share scheme the smart move is to,

1. Exercise the share option to buy the shares.

2. Sell some shares each year to use the £11,000 annual tax-free gain allowance.

[3. If you have a spouse, give them some of the shares. No CGT on gift between spouses. The spouse can then also use his/her annual £11,000 tax-free allowance.]

Simple example:

Amount saved during life of savings contract = £7,200
Use the £7,200 to exercise options and buy the shares.
Let's say the shares are now worth £30,000 so there's a capital gain of £22,800
Sell 45% of the shares to release £13,500 of cash. The capital gain on those shares is £10,260 so tax free.
Next year repeat the process, releasing another £13,500 of cash tax free.
Year after that, sell the remaining 10% of shares tax free.

[Office_Monkey]

Claudia Skies said:

If you have a big gain on SAYE share scheme the smart move is to,

1. Exercise the share option to buy the shares.

2. Sell some shares each year to use the £11,000 annual tax-free gain allowance.

[3. If you have a spouse, give them some of the shares. No CGT on gift between spouses. The spouse can then also use his/her annual £11,000 tax-free allowance.]

Simple example:

Amount saved during life of savings contract = £7,200
Use the £7,200 to exercise options and buy the shares.
Let's say the shares are now worth £30,000 so there's a capital gain of £22,800
Sell 45% of the shares to release £13,500 of cash. The capital gain on those shares is £10,260 so tax free.
Next year repeat the process, releasing another £13,500 of cash tax free.
Year after that, sell the remaining 10% of shares tax free.

When transferring to spouse is stamp duty payable? Am in two minds as to whether to take the hit on CGT by selling (only £2k over threshold) or transfer to the OH & then sell

[jamesc_1729]

There's some good advice above.

The only thing I would add is that if the scheme finishes early, for example if the company is sold, then any profit is assessed as income again and not capital gains, meaning 40% tax. This scenario happened to me some years ago.