How to best minimise tax on £50Kish SAYE 2024

[CoffeeGuy]

Hello Everyone,

Hope someone can help here. I thought I had all this sorted until the government changed the rules on CGT and SAYE (or rather the tax free values).

Long and short of it is that next year my 5 year @ £500 SAYE matures. The stock has almost doubled in price as it stands. The plan was to pay off the mortgage (less than a second hand performance BMW) but now it seems like I am going to get taxed out the backside.

The rate of GCT (As I understand it) also jumps when you become a higher tax earner? If so, that will also impact me.

I believe some mitigation is:

The fact that the original investment amount comes out tax free anyway
Gift (Well ahead of time) half the shares to my wife to maximise the tax free

Is there anything else I can do to reduce the tax? I was thinking of just splitting it and drawing it down at £6K/yr to put into other things.

[Deesee]

At present you get the investment + bonus tax free, if the surplus is transferred to a Pension/ISA thats also tax fee.

Transfer to a ISA then draw as you wish?

[MattS5]

Are you sure it's coming from pre tax income?

My payments are taken post tax for the SAYE scheme with my employer.

My stock has also just slightly more than doubled too, however, i'm only in a 3 year scheme, so I think I've escaped that bullet

[chrisdk]

CoffeeGuy said:

Hello Everyone,

Hope someone can help here. I thought I had all this sorted until the government changed the rules on CGT and SAYE (or rather the tax free values).

Long and short of it is that next year my 5 year @ £500 SAYE matures. The stock has almost doubled in price as it stands. The plan was to pay off the mortgage (less than a second hand performance BMW) but now it seems like I am going to get taxed out the backside.

The rate of GCT (As I understand it) also jumps when you become a higher tax earner? If so, that will also impact me.

I believe some mitigation is:

The fact that the original investment amount comes out tax free anyway
Gift (Well ahead of time) half the shares to my wife to maximise the tax free

Is there anything else I can do to reduce the tax? I was thinking of just splitting it and drawing it down at £6K/yr to put into other things.

Far from a tax expert but you probably have more headroom than you think - assume you must’ve converted £30k into £60k ? So looking at a £30k gain ?

Understand you can bed £20k worth of shares straight into the ISA, assume you can then sell what you want tax-free ?

That leaves £40k of shares (with £20k of profit) left over. Split 50/50 means £10k each of profit to be managed. CGT allowance drops to £3k from April 2024 (£6k from 1st April 23 until end March 24) so you’ll both end up with £7k liability (your wife can’t bed gifted shares into an isa).

Worst case is taking that £7k at 20% tax cost (not checked but don’t think the rates are changing) so you each end up with a £1400k tax bill. In other words, you get £60k gross proceeds (£30k profit) but walk away with “only” £57.2k (or £27.2k profit).

Deferring for a year means you’ll avoid a tax bill as you can use another year of ISA allowance.

Happy for someone to tear this comp apart but might not be as tax heavy as you think ?

[chrisdk]

To add, potentially you could be looking at not needing to pay the tax bill until Jan 2026 (self-assessment period for 2024-25) so whacking that £2800 away at 5% means your net position is even “less worse”.

[CoffeeGuy]

Thanks for the replies there. I now have a much better understanding of how it can break down. Just to confirm the SAYE is post tax (as I believe everyones is).

I just now have to put plans into action.