Selling US shares - US & UK tax situation
Discussion
I have some shares in a US company bought via an employee share option scheme back in about 2000.
They are a long term rainy day fund, but YTD they are up some 40% (record high) and up about 300% in the last 10 years.
Therefore, I'm tempted to take a bit of profit whilst avoiding exceeding the UK CG threshold.
Does anyone know if I will I have to pay any tax on them in the US too?
On dividend income, Uncle Sam takes some 30% witholding tax, will this apply in this case?
Thanks.
They are a long term rainy day fund, but YTD they are up some 40% (record high) and up about 300% in the last 10 years.
Therefore, I'm tempted to take a bit of profit whilst avoiding exceeding the UK CG threshold.
Does anyone know if I will I have to pay any tax on them in the US too?
On dividend income, Uncle Sam takes some 30% witholding tax, will this apply in this case?
Thanks.
Usually you have a W8BEN form filled out with the US tax office, maybe its in your scheme admin system.
Then when you sell the US tax authority just keep back tax at your tax rate as applicable (as they are informed by your employer). Nothing more to do than that.
sold all mine when I left a US company 18 months ago....
check in the details of your scheme. Maybe you have an online system for admin and can look in there and sell from there.
Then when you sell the US tax authority just keep back tax at your tax rate as applicable (as they are informed by your employer). Nothing more to do than that.
sold all mine when I left a US company 18 months ago....
check in the details of your scheme. Maybe you have an online system for admin and can look in there and sell from there.
Depends, I seem to remember if you hold them for so many years then its less or no tax. I never held any over 5 years i kept selling along the way over 14 years of working for US company, always had the tax withheld.
Best check with the scheme administrator to be sure, although in my experience it was all automatic no chance to sell them and worry about tax later, its all done at source, automatically
Best check with the scheme administrator to be sure, although in my experience it was all automatic no chance to sell them and worry about tax later, its all done at source, automatically
It’s a while since I last did this, but I have a recollection of a mandatory non-resident withholding of 30%, regardless of the final tax owed in the US, then having to file a US tax return and finally getting some of the tax refunded a couple of years later
Edited to correct non-resident withholding to 30%. The last letter I had from IRS was that 1040-NR tax returns are taking around a year to deal with due to staff shortages
Edited to correct non-resident withholding to 30%. The last letter I had from IRS was that 1040-NR tax returns are taking around a year to deal with due to staff shortages
Edited by mikef on Sunday 9th June 17:24
The good news is that as a non-resident (and presumably non-citizen/LPR) you are not subject to US CGT on this when you cash out.
However, as you note, standard withholding for non-residents is 30%.
But, as you have filed a W8BEN and are resident in the UK, they should have taken into account that the US and UK have a tax treaty at a lower withholding rate, which if I recall correctly, is 15% [EDIT - it has increased to 20% - http://taxsummaries.pwc.com/ID/Withholding-tax-(WH... ] and not been withholding 30%.
You can file a US tax return for any refund of overpayment / over-withholding, and you can also file tax returns for previous years for the same.
edit to add some light (!) reading: https://www.irs.gov/pub/irs-pdf/p515.pdf
However, as you note, standard withholding for non-residents is 30%.
But, as you have filed a W8BEN and are resident in the UK, they should have taken into account that the US and UK have a tax treaty at a lower withholding rate, which if I recall correctly, is 15% [EDIT - it has increased to 20% - http://taxsummaries.pwc.com/ID/Withholding-tax-(WH... ] and not been withholding 30%.
You can file a US tax return for any refund of overpayment / over-withholding, and you can also file tax returns for previous years for the same.
edit to add some light (!) reading: https://www.irs.gov/pub/irs-pdf/p515.pdf
Recently I sold a tranche of shares in a USA company. Did this in March and May. I have filed an in force W8-BEN form so I am a non registered alien for USA tax purposes. On the sale of the shares there was no USA tax liability and I received the full proceeds gross, less dealing expenses which were minimal.
These transactions are liable for UK CGT so I ensured that (a) the CG was below the relevant thresholds for each tax year and also (b) the entire proceeds of each transaction was less than 4 times the thresholds so that there was no HMRC reporting requirements for each of the transactions.
I'd advise establishing and maintaining good records too, especially if, like me, the plan is to repeat the same procedures for a series of UK tax years. You need to create a "section 104 holding" , maintain the record, and update it for each transaction.
R.
These transactions are liable for UK CGT so I ensured that (a) the CG was below the relevant thresholds for each tax year and also (b) the entire proceeds of each transaction was less than 4 times the thresholds so that there was no HMRC reporting requirements for each of the transactions.
I'd advise establishing and maintaining good records too, especially if, like me, the plan is to repeat the same procedures for a series of UK tax years. You need to create a "section 104 holding" , maintain the record, and update it for each transaction.
R.
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