Shares through work (DHL). Worth it?
Discussion
Hi All,
Been sent a letter from work inviting me to buy shares through my payslip, in a "tax efficient" way. I work for DHL.
Am assuming it's like the pension. Salary sacrifice before the income/NI tax is applied.
Min is £10 a month, max is £150 a month. Not sure on the details, but I assume the funds go to a pot, which then buys shares.
Never been in a position before to invest in shares. Any help would be greatly appreciated.
Just a quick Google suggests current price is $30 a share. Highest it's been in last 5 years is $60 ish.
Share price history graph on Google looks like prices have nose dived.
Been sent a letter from work inviting me to buy shares through my payslip, in a "tax efficient" way. I work for DHL.
Am assuming it's like the pension. Salary sacrifice before the income/NI tax is applied.
Min is £10 a month, max is £150 a month. Not sure on the details, but I assume the funds go to a pot, which then buys shares.
Never been in a position before to invest in shares. Any help would be greatly appreciated.
Just a quick Google suggests current price is $30 a share. Highest it's been in last 5 years is $60 ish.
Share price history graph on Google looks like prices have nose dived.
There are a couple of different share purchase schemes so you need to understand the details. Most that I'm aware of are 'share save' where you buy discounted shares out of your post-tax earnings. So no income tax benefit but you might get 10-20% discount on the share purchase meaning you're immediately 'in the money'. However, you usually aren't allowed to sell the shares for a couple or few years.
Another scheme is share options, where you have x amount taken from your earnings (again - post tax I believe) every month for - typically - 3 or 5 years. At the very start you are given an 'option price' that is based on the current share value (so say 30p for DHL) which you will be able to purchase at the end of the x years. Assuming the share price has gone up then its a no brainer that you exercise the 'option' to buy at your 30p and are then able to sell at the prevailing market share price. Alternatively if the share price has sunk in the intervening years then you can (usually at any time you wish) cancel and just take back the money you've put in to date. Its a no-lose scenario, with the minor exception of any interest you might have earned had you instead put a similar amount in a savings account.
Another scheme is share options, where you have x amount taken from your earnings (again - post tax I believe) every month for - typically - 3 or 5 years. At the very start you are given an 'option price' that is based on the current share value (so say 30p for DHL) which you will be able to purchase at the end of the x years. Assuming the share price has gone up then its a no brainer that you exercise the 'option' to buy at your 30p and are then able to sell at the prevailing market share price. Alternatively if the share price has sunk in the intervening years then you can (usually at any time you wish) cancel and just take back the money you've put in to date. Its a no-lose scenario, with the minor exception of any interest you might have earned had you instead put a similar amount in a savings account.
I tried to give a bit of a break down here recently regarding SIPs (which is what it sounds like you are being invited to join) albeit within a thread about SAYEs. Not sure what the "front loading" comments are about tbh.
There must be a booklet available too, that would be worth tracking down as it should clarify things more, but any specific questions happy to try and help.
There must be a booklet available too, that would be worth tracking down as it should clarify things more, but any specific questions happy to try and help.
Edited by DavidJJ on Wednesday 28th September 21:34
Nitro182 said:
Don't bother with any work share scheme. If you have a mortgage over pay that instead. Or pay more into a pension which will be more diverse.
Well, since I invested in the company share scheme and held the shares the increase in share value is +14%pa. Glad I did it although I do have a CGT issue now! Divis have been good too...pay for holidays.R.
The Leaper said:
Nitro182 said:
Don't bother with any work share scheme. If you have a mortgage over pay that instead. Or pay more into a pension which will be more diverse.
Well, since I invested in the company share scheme and held the shares the increase in share value is +14%pa. Glad I did it although I do have a CGT issue now! Divis have been good too...pay for holidays.R.
Stop wetting your pants on when the tax is due...its still more money that you would get if you didnt do it.
Big picture time
MuddyK said:
Any more information on this front loaded tax? Do you mean the income/NI that I avoid will be front loaded?
Let's say I decide to put in £100 per month. So that's saving me about £25ish in Income tax/NI plus my £100 towards shares.
Am I getting this right?
you get taxed on the amount of discount your being offered as it is seen as a BIK. I am not sure on Monthly as mine was done as a Lump sum purchase via a loan from my company which was then paid back over the following 12 months. Let's say I decide to put in £100 per month. So that's saving me about £25ish in Income tax/NI plus my £100 towards shares.
Am I getting this right?
essentially they over paid me by £620 odd but also did a deduction of £620 allowing the tax to be added for the discount.
WY86 said:
you get taxed on the amount of discount your being offered as it is seen as a BIK. I am not sure on Monthly as mine was done as a Lump sum purchase via a loan from my company which was then paid back over the following 12 months.
essentially they over paid me by £620 odd but also did a deduction of £620 allowing the tax to be added for the discount.
Except this has very likely nothing to do with the DHL scheme mentioned which sounds very much like a UK tax advantaged share scheme and specifically a Share Incentive Plan (aka SIP).essentially they over paid me by £620 odd but also did a deduction of £620 allowing the tax to be added for the discount.
I pay into a share scheme. £150/ month. Saving the ~42% on tax and ni.
Bought shares are tax free after 5 years, get 1 in 10 shares purchased free (tax free after 5, although forfitted up to 4 years if you leave the firm), reinvest dividend shares Re tax free after 3 years or you can get a cash payout (under dividend rules tax free up to £2k pa).
That said over about 6 years I have broken even hahaha, all about the long game right?!
Bought shares are tax free after 5 years, get 1 in 10 shares purchased free (tax free after 5, although forfitted up to 4 years if you leave the firm), reinvest dividend shares Re tax free after 3 years or you can get a cash payout (under dividend rules tax free up to £2k pa).
That said over about 6 years I have broken even hahaha, all about the long game right?!
WY86 said:
you get taxed on the amount of discount your being offered as it is seen as a BIK. I am not sure on Monthly as mine was done as a Lump sum purchase via a loan from my company which was then paid back over the following 12 months.
essentially they over paid me by £620 odd but also did a deduction of £620 allowing the tax to be added for the discount.
Not taxed on the discount if it’s an approved plan which it most likely is. There’s no front loading of tax either, SAYE is taken from net pay and SIP from gross. essentially they over paid me by £620 odd but also did a deduction of £620 allowing the tax to be added for the discount.
I’d sign up.
Nitro182 said:
Don't bother with any work share scheme. If you have a mortgage over pay that instead. Or pay more into a pension which will be more diverse.
I am so grateful that you were not my financial advisor.
Any employee who has the opportunity to participate in a share option scheme, should grab as much as they can afford.
REASON - Talk about placing a bet on a horse, after it has crossed the finish line.
Place your bet, then if it wins collect winnings, if it loses get your full stake back. Why do you say don't bother with a share scheme that works like that ? The only possible loss, is probably forfeiting interest on your savings, if your share option scheme is not a winner.
The series of share option schemes that I took part in, enabled me to retire in my 50s and never worry about money again.
If you would instead prefer to overpay a mortgage, or pay more into a pension then go ahead, but you won't have the chance of a big win. It does of course help, if your employer steadily increases their profits.
Nitro182 said:
Don't bother with any work share scheme. If you have a mortgage over pay that instead. Or pay more into a pension which will be more diverse.
I an so grateful you are not my financial advisor.At one point I exercised options from a 5 year scheme that cost me £1.19 a share. Sold for over £10. At that point realising our CGT allowances annually we started paying lumps off the mortgage. It was gone in under 9 years.
2 GKC said:
You don’t get your stake back on all share schemes. In a SIP you’re taking risk, albeit mitigated by the discount to market price.
Thanks for your comment, but surely I made it clear, that I was only talking about the sharesave type options.
They are the ones never to decline.
The option has no risk (your savings being entirely separate), but obviously risk begins as soon as you acquire any equity asset.
There used to be an even better option scheme for employees. Pay a 1% deposit to buy a share option, then pay the balance to exercise that option up to 10 years later. Imagine buying able to buy shares at the 10 year old prices !
Are there still schemes like that these days ?
( One way to buy employee loyalty. )
Edited by Jon39 on Friday 30th September 09:18
Caveat what I'm saying as assumptions from what you've said OP.
Because it appears to be a gross deduction capped at £150 per month I assume uts an approved scheme, the cap is an hmrc cap at £150.
If you are a lower rate tax payer who is paying NI then you are savng 32% (ignoring the extra 1.25% which the govt are getting rid of).
If you are a 40% tax payer then you save 42%.
So, very roughly a basic raye tax payer on £30k who put £150 per month in would typically see a reduction in take home pay of £100 per month but will have bought £150 worth of shares.
The shares need to sit there for 5 years and are then tax free. If the shares pay dividends you get those. Some employers add some free shares on top of what you are buying. Normally you can access the shares before the 5 years but if you do they are subject to tax and NI.
Your employer should have some material that explains the exact detail of your scheme.
I won't advise what is best for you but, I am putting the full £150 into my employers scheme!
Because it appears to be a gross deduction capped at £150 per month I assume uts an approved scheme, the cap is an hmrc cap at £150.
If you are a lower rate tax payer who is paying NI then you are savng 32% (ignoring the extra 1.25% which the govt are getting rid of).
If you are a 40% tax payer then you save 42%.
So, very roughly a basic raye tax payer on £30k who put £150 per month in would typically see a reduction in take home pay of £100 per month but will have bought £150 worth of shares.
The shares need to sit there for 5 years and are then tax free. If the shares pay dividends you get those. Some employers add some free shares on top of what you are buying. Normally you can access the shares before the 5 years but if you do they are subject to tax and NI.
Your employer should have some material that explains the exact detail of your scheme.
I won't advise what is best for you but, I am putting the full £150 into my employers scheme!
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