Capital gains on US stock
Discussion
Just trying to work out the rules for capital gains on US stock vs currency exchange gains, so would be great if anyone knows the rules here.
Say your company gives you 1000 stock, at $10 = $10,000 dollars total value. On the day they give you the stock say the exchange rate is 0.8
So total pound value of stock given is £8,000
In the next 6 months the stock goes to $20, and the exchange rate gets better to 0.9. So now the dollar value of the stock is $20,000 and the pound value is £18,000
Have you gained £10,000 in capital gains, or do you ignore the exchange rate and therefore it is only £9,000 in capital gains ($10,000 gain @ 0.9)?
Say your company gives you 1000 stock, at $10 = $10,000 dollars total value. On the day they give you the stock say the exchange rate is 0.8
So total pound value of stock given is £8,000
In the next 6 months the stock goes to $20, and the exchange rate gets better to 0.9. So now the dollar value of the stock is $20,000 and the pound value is £18,000
Have you gained £10,000 in capital gains, or do you ignore the exchange rate and therefore it is only £9,000 in capital gains ($10,000 gain @ 0.9)?
It depends on whether you hold the stock short term or long term (more than a yr). It could be zero tax. You will need to check with a CPA. I would have thought someone at the company you work for can give you a steer
My understanding is if you hold for a year then it's classed as 'Long Term' and in any one tax year you are allowed $40k tax free. 40-400k @20% I think
If you sell the stock inside a year it is taxed as if income (tax)
Pete, I should also point out that the above is based on a US tax payer
If you are a UK tax payer the UK rules apply which say tax free up to 12,300 gbp per year. You could always gift some of the shares to your spouse (if applicable) and utilise their allowance
My understanding is if you hold for a year then it's classed as 'Long Term' and in any one tax year you are allowed $40k tax free. 40-400k @20% I think
If you sell the stock inside a year it is taxed as if income (tax)
Pete, I should also point out that the above is based on a US tax payer
If you are a UK tax payer the UK rules apply which say tax free up to 12,300 gbp per year. You could always gift some of the shares to your spouse (if applicable) and utilise their allowance
Edited by Burwood on Tuesday 2nd November 13:07
RacingPete said:
Just trying to work out the rules for capital gains on US stock vs currency exchange gains, so would be great if anyone knows the rules here.
Say your company gives you 1000 stock, at $10 = $10,000 dollars total value. On the day they give you the stock say the exchange rate is 0.8
So total pound value of stock given is £8,000
In the next 6 months the stock goes to $20, and the exchange rate gets better to 0.9. So now the dollar value of the stock is $20,000 and the pound value is £18,000
Have you gained £10,000 in capital gains, or do you ignore the exchange rate and therefore it is only £9,000 in capital gains ($10,000 gain @ 0.9)?
In general, the rule is that CGT is always calculated in sterling at all points so you need to convert each part of the transaction according to the exchange rate in effect at the time. So your first example is correct.Say your company gives you 1000 stock, at $10 = $10,000 dollars total value. On the day they give you the stock say the exchange rate is 0.8
So total pound value of stock given is £8,000
In the next 6 months the stock goes to $20, and the exchange rate gets better to 0.9. So now the dollar value of the stock is $20,000 and the pound value is £18,000
Have you gained £10,000 in capital gains, or do you ignore the exchange rate and therefore it is only £9,000 in capital gains ($10,000 gain @ 0.9)?
https://www.pd-taxconsultants.co.uk/knight-knight-...
Thanks both - should have stated I am UK tax payer.
As they are RSUs I can't gift them to my wife (which is a shame as she earns zero looking after the children) - so looks like the best course of action is to sell all and buy them back in her name (or split as appropriate, or diversify my portfolio) whenever we reach a Capital Gains threshold - and max out both our ISAs with them too.
Think I might need an advisor to do and manage this
As they are RSUs I can't gift them to my wife (which is a shame as she earns zero looking after the children) - so looks like the best course of action is to sell all and buy them back in her name (or split as appropriate, or diversify my portfolio) whenever we reach a Capital Gains threshold - and max out both our ISAs with them too.
Think I might need an advisor to do and manage this
RacingPete said:
Thanks both - should have stated I am UK tax payer.
As they are RSUs I can't gift them to my wife (which is a shame as she earns zero looking after the children) - so looks like the best course of action is to sell all and buy them back in her name (or split as appropriate, or diversify my portfolio) whenever we reach a Capital Gains threshold - and max out both our ISAs with them too.
Think I might need an advisor to do and manage this
There is no restriction on transferring RSUs to your wife after they have vested, as at that point they are essentially just shares - https://frazerjames.co.uk/rsus-a-tech-employees-gu...As they are RSUs I can't gift them to my wife (which is a shame as she earns zero looking after the children) - so looks like the best course of action is to sell all and buy them back in her name (or split as appropriate, or diversify my portfolio) whenever we reach a Capital Gains threshold - and max out both our ISAs with them too.
Think I might need an advisor to do and manage this
But using your CGT allowance every year to sell & rebuy into an ISA is a good idea, assuming you are planning on hanging onto them for the long term. You will be hit by currency conversion fees both ways but with a bit of luck that will be dwarfed by the CGT protection as and when you do come to sell.
deckster said:
There is no restriction on transferring RSUs to your wife after they have vested, as at that point they are essentially just shares - https://frazerjames.co.uk/rsus-a-tech-employees-gu...
That is not necessarily true. Assuming you still work for the company in which you have shares, you are probably classified as an "insider" in possession of MNPI, so there are windows in which you can and can't sell / transfer. Those restrictions usually cover household members who will also be deemed to be "insiders".NickCQ said:
deckster said:
There is no restriction on transferring RSUs to your wife after they have vested, as at that point they are essentially just shares - https://frazerjames.co.uk/rsus-a-tech-employees-gu...
That is not necessarily true. Assuming you still work for the company in which you have shares, you are probably classified as an "insider" in possession of MNPI, so there are windows in which you can and can't sell / transfer. Those restrictions usually cover household members who will also be deemed to be "insiders".probably something you should be aware of with RSUs is they will with-hold shares initially to cover your income tax, in most cases. I have been employed by 3 US tech companies and always had the withholding process.
So in your example I am granted 1000 RSUs
Typically over 3 years
On first vest date i get 25%
so that means 250 are released to me
Login to my (usually) Morgan Stanley account and i'll see 125!
When it happened way back in 2010 i sh*t meself as i thought they had made a mistake. I have since realised that your broker/employer hold back typically 50% for your tax.
So beyond that if you are worrying the CGT threshold on an annual basis you are doing well.
So in your example I am granted 1000 RSUs
Typically over 3 years
On first vest date i get 25%
so that means 250 are released to me
Login to my (usually) Morgan Stanley account and i'll see 125!
When it happened way back in 2010 i sh*t meself as i thought they had made a mistake. I have since realised that your broker/employer hold back typically 50% for your tax.
So beyond that if you are worrying the CGT threshold on an annual basis you are doing well.
One or two points.
OP says that the shares will be "given" to him by his employer. Nice, but as a UK tax payer the value of the shares on the day given will be considered income for tax purposes in the UK. It is necessary to declare this as income when completing the relevant tax year's SA. Income tax will be at OP's highest rate for the tax year in question.
Subsequently, any CGT will be calculated with a base of the shares' value on the day given, so any amount above that will be liable for CGT (less any UK CGT allowance, of course).
Once the shares are in the OP's ownership, he should be able to transfer ownership all or part to his wife, usually half, so that both get the UK allowance for CGT. As regards the transfer, it is likely that the share administrator will require a "Medallion Guarantee" completed by a UK accredited company that can issue the Guarantee, and the fee for this is pretty expensive.
R
OP says that the shares will be "given" to him by his employer. Nice, but as a UK tax payer the value of the shares on the day given will be considered income for tax purposes in the UK. It is necessary to declare this as income when completing the relevant tax year's SA. Income tax will be at OP's highest rate for the tax year in question.
Subsequently, any CGT will be calculated with a base of the shares' value on the day given, so any amount above that will be liable for CGT (less any UK CGT allowance, of course).
Once the shares are in the OP's ownership, he should be able to transfer ownership all or part to his wife, usually half, so that both get the UK allowance for CGT. As regards the transfer, it is likely that the share administrator will require a "Medallion Guarantee" completed by a UK accredited company that can issue the Guarantee, and the fee for this is pretty expensive.
R
We use Fidelity net benefits and they have stated that you can’t transfer the shares to a spouse through their system if outside the USA. Wife will be inside trading window blackouts too, so praying that safe from inside trading situation.
For tax purposes, our RSUs are taxed at 62.5% of total vested (they assume high rate tax 45%, employer NI, and employee NI also need to be covered during vest) - will be an extra 3% kick when new NI payments come in next year.
I’m looking to hold for 2 years, and in the last 9 months the exchange rate and shares have gone favourable, so even though this year they will struggle to hit CGT, my worry is if I don’t utilise the position then I will get hit if the shares continue to rise. Hence the ask if exchange takes into account with CGT.
Looks like best to take the small exchange rate hits to utilise max tax free gains and ISAs this financial year.
For tax purposes, our RSUs are taxed at 62.5% of total vested (they assume high rate tax 45%, employer NI, and employee NI also need to be covered during vest) - will be an extra 3% kick when new NI payments come in next year.
I’m looking to hold for 2 years, and in the last 9 months the exchange rate and shares have gone favourable, so even though this year they will struggle to hit CGT, my worry is if I don’t utilise the position then I will get hit if the shares continue to rise. Hence the ask if exchange takes into account with CGT.
Looks like best to take the small exchange rate hits to utilise max tax free gains and ISAs this financial year.
RacingPete said:
RSUs are taxed at 62.5% of total vested ... employer NI
This is an accounting trick to make the bonus seem bigger than it really is, right? Usually you would quote a salary NET of employers' NI...Although if you are getting interim dividends on the gross gross amount then it's not so bad.
This is super timely as I am in a similar (but worse) situation having left my RSUs to grow for too long.
My plan is currently open 2x AJbell share trading accounts - 1 for me, one for the Wife.
1) Transfer the (£24600) shares from my Fidelity Net Benefits to my AJBell share account account. So nothing special other than change of broker.
2) Then Transfer shares (£12,300) from my AJBell account to my Wife’s AJBell account
3) Finally Move them from her account to her AJBell ISA
Do similar and transfer £12,300 of shares to my ISA. I understand this is known as bed and isa - but CGT is still in play as the shares are effectively sold in the transfer from trading account to ISA.
Rinse and repeat over a number of years - although potentially never catching it all up as CGT Limits me to taking out ~£24k max a year from my Vested shares.
Hopefully someone on here doesn’t point out it’s a idiotic plan
My plan is currently open 2x AJbell share trading accounts - 1 for me, one for the Wife.
1) Transfer the (£24600) shares from my Fidelity Net Benefits to my AJBell share account account. So nothing special other than change of broker.
2) Then Transfer shares (£12,300) from my AJBell account to my Wife’s AJBell account
3) Finally Move them from her account to her AJBell ISA
Do similar and transfer £12,300 of shares to my ISA. I understand this is known as bed and isa - but CGT is still in play as the shares are effectively sold in the transfer from trading account to ISA.
Rinse and repeat over a number of years - although potentially never catching it all up as CGT Limits me to taking out ~£24k max a year from my Vested shares.
Hopefully someone on here doesn’t point out it’s a idiotic plan
See this is why I posted
Yes - I think you are correct, it should be £24600 of profits.
Same as you, the income tax is already paid on vest. So that means the only limiting factor would be our ISA limits of 2x £20k and more likely allowing me to get it all out reasonably quickly.
Yes - I think you are correct, it should be £24600 of profits.
Same as you, the income tax is already paid on vest. So that means the only limiting factor would be our ISA limits of 2x £20k and more likely allowing me to get it all out reasonably quickly.
Edited by mgst170 on Tuesday 2nd November 20:05
anonymous said:
[redacted]
I’ve now worked for six US tech companies and I’ve never had to declare anything. Firstly I Iose half the shares to cover the tax.
The month following the transaction I’ll have an extra line (RSU gain) on my payslip showing the transaction as income and then tax withheld also showing (RSU Deduction).[/quote
IMO it's not a question of "having to declare " but more a matter of the legal requirements to declare all income to HMRC in the UK. Against any UK tax liability you can offset any income tax paid to the USA IRS.
R.
anonymous said:
[redacted]
Same here, income tax is all dealt with at point of vest.Just have to worry about and declare CGT if needed. Keep below the £50k reporting threshold and life is easy.
If I remember rightly the paying employers nic as about not being subject to further tax beyond GCT
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