Paying tax (CGT) on shares-

I think the CGT allowance is being dropped from £12k to only a couple of £k right about now (might be this week with the new financial year). You might want to act quick if so!

Had similar recently. I had to pay income tax and NI on the shares as these were given at zero cost (the giving of shares is essentially a benefit-in-kind, so taxable like any other benefit). I sold my shares as soon as they vested.

CGT would only be payable on any profit (over the £12k threshold) you made on the shares, but I believe if you hold them for long enough (3 years?) then there is no CGT*

The key is Capital GAINS tax, it's only tax on any profit over the threshold

*This could be nonsense!

scruff- unfortunately the window opens in May, so I'll need to wait for this. But thanks.

dmorts- this is the bit that confused me. As the entire thing is profit to me, but less than the annual CGT allowance, then it looked as though it may have not attracted tax. As said, this sounded very unlikely. Cheers 🙂

Very simple guide here: https://www.lovewell-blake.co.uk/news/capital-gains-tax-changes-a-summary

Gov pages here which seem to imply that the CGT allowance hasn't dropped to £6k quite yet: https://www.gov.uk/capital-gains-tax

Use one of the online calculators like this
https://www.hl.co.uk/tools/calculators/capital-gains-tax-calculator

Not sure that one is 100% correct for Scotland though.

Thanks Kryton. I read that one yesterday and it confused me even further.

'CGT is calculated on the difference between what an item was acquired for and its value when it is disposed of (this can, in many circumstances include when items are gifted). Certain allowable expenses can be deducted when calculating the tax due.'

I acquired this for £0.
I may be selling it for £2600
£2600 < £12500

At the very least, income tax and NI will be due on the shares as they were given at zero cost.

Last year, my employer gave me shares in our company, which trades publicly. These amount to $12000 in total.
We’re allowed to sell a batch of these annually, 1 batch per year, during a ‘trading window’. I can sell approx. $3000 of these shares this year.

Sounds more like $3000 in share options vested this year and you took ownership of the shares. At this point you are liable for income tax and NI, as they came from your employer at zero cost. You can then either immediately sell all of the shares, sell enough to cover the income tax or NI and hold the rest, or hold onto them all but have to pay the income tax and NI somehow. If you hold onto the shares and then sell later, should you make a profit of over £12k then you will also have to have to pay CGT. That's my understanding

Also thanks to oldtennishoes. Similar calculators also seem to show that I would owe £0. I think dmorts is right;

-if I BUY shares, then sell them, then tax is owed on the profit
-if I'm GIFTED shares, then these are a BiK, are then seen as income, and attract tax and NI

£2600 < £12500

In which case, it's tax free...

If I read things correctly, I have a “CGT allowance” of £12300. This seems to be entirely separate to my “personal tax allowance”, which is £12570 up here in Scotland.

Yup

...link I used indicated that as the potential sale in 2023 is less than this years CGT allowance, then no tax would be paid on these. Can that be correct?

Yup

It seems a little generous for HMRC.

Also yup which is why as above they are dropping it over the next few years. One of the few equitable things the Tories have ever done.

Short version. Sell your less than £6k of shres in May. No further action needed.

footflaps, the generalist: if only!

https://www.gannons.co.uk/cases/gifting-shares-employees/

"Working out the taxable benefit on making the gift of shares
The basic rule is that on gifting shares an employee is deemed to have received a benefit in kind. Income tax and sometimes national insurance will then be payable. The amount of tax payable depends upon the value of the shares for tax purposes. We explained that the value of shares in private companies for tax purposes is not the same as the commercial value the shares may command.

We were asked to apply our judgement in arriving at the tax value of the shares. The company was using growth shares which produced a lower valuation than ordinary shares as the risk of not receiving reward was greater. If HMRC challenged the employee’s tax return and found the tax value to be higher than reported there would be interest and penalties payable by the employee.

Although this is the employee’s personal responsibility our client decided it best to have us guide the employee."

Which sounds like the situation my colleagues have described. Basically: 'free' shares = income.

We need more details but I suspect dmorts speaks the truth here.

I get about 10k company shares a year and default to a sell to cover option and keep the remained as a little retirement boost. I will have to pay CGT on the 'profit' I make based on the difference ultimately sell at and the price I want given them at which will be in the paper work somewhere, (obviously profit above any CGT threshold at that point in time).

At the very least, income tax and NI will be due on the shares as they were given at zero cost.

We have the tax/NI taken at the time of GRANTING not selling. Check your shares (real shares, and not options to buy shares) are not under the same scheme. Otherwise it's income and you will be subject to income tax and NI at your marginal rate. Capital gains will be modest by comparison, unless your shares have increased in value drastically since you were granted them, the capital gains being number of shares x difference in share price.

footflaps, the generalist: if only!

That's private shares, the OP's are in the market, so their value is always known:

Last year, my employer gave me shares in our company, which trades publicly.

I had a situation similar to the OP. American company and each year for 3 years 1/3 of my gift vested. Fidelity ran the platform for selling but they took the tax at source whenever I sold a tranche of vested shares.

Cody. Indeed you may be right, the devil is in this bit:

my employer gave me shares in our company,

We need more detail about how this.
I had gone on the assumption that the company had dealt with all the income tax etc when they gave him to them, just like they would with other stuff.

But probably best not to assume.

My company gives me £600 of shares a year on which I pay no tax.

But obviously there are parameters that the company must follow.

Thanks again all.

If it helps, the platform used for this is "e-trade". Based in the US. I'll look at what they say re tax.

The current threshold is 12.3k as stated and there's no need to report if both (a) your total gains for the year from all sales is under that threshold and (b) the total sales in the year is less than 4 x the threshold ie about 50k. If you exceed either of these you must report (eg if you sell 60k of shares with say 10k gain, no tax to pay, there's still a form to fill in).

But there was the need to pay (income!) tax on the shares as a benefit in kind when you were first given them, dependent on the market price at that time.

You pay less far tax for sitting on your arse watching your shares rise in value than you do working for a living. Because, capitalism. It's more important that the rich get richer than that people are rewarded for working.

@codybrennan these sound like restricted stock units/RSUs. If so see https://frazerjames.co.uk/rsus-a-tech-employees-guide/

Hi beargrease- I've just dug out an old email and it mentions "RSUs". Apologies, I probably should have mentioned this earlier but this is all very new to me. Thanks.

best to dig out the paperwork, does your company not have a basic question and answers document?
if not get in touch with HR.

some general info on RSU's here
https://www.investopedia.com/terms/r/restricted-stock-unit.asp

For reference CGT allowances, but gifted shares will more likely be BIK/income
Tax Year CGT Allowance
2022-23 £12,300
2023-24 £6,000
2024-25 £3,000

note also dividend & interest allowances are dropping in similiar fashion whilst income tax bands remain on hold, hence we'll all end up paying more tax.

You pay less far tax for sitting on your arse watching your shares rise in value than you do working for a living.

Not sure I'd recommend having a large amount of shares in the company you work for though. It could all go wrong if the company dives, potentially losing your job and your savings in one hit.

Not sure I’d recommend having a large amount of shares in the company you work for though. It could all go wrong if the company dives, potentially losing your job and your savings in one hit.

Anyone remember Enron?

All the employees 401k funds (pensions) were 100% Enron shares!!

Ouch...

Assuming you are taxed through PAYE, I would expect the value of any BiK gifts to be put through that and Income tax/NI paid at the time; for RSUs that's the date of vesting not initial award - not something I'm knowledgeable about but maybe the window you have is the vesting? Your payslips should show the tax when it's due.

CGT is separate and it looks as if you'll be within the allowance - assuming you aren't using the allowance for any other gains.

I think (IANA tax Accountant) that you will pay income tax and NI on the original gifted tranche. You can pay the tax yourself but a grown up company will often do the calculations as to how much needs to be sold to cover the liability and do the trade; a US parent may not be as helpful. You may then become liable to CGT on the remaining balance should you choose to sell them in the future and there is a profit; but if this is your sole investment you will unlikely trouble the scorer.

I have RSUs with a "grown up" us company and @blackhat describes my situation nicely

What happens to you depends on weather you hold RSU or share options. Blackhat is right.

Your company should take your tax off the share holding when they vest, usually via witholding through the sale of shares. Your shares should be listed on you P60.

Then when you sell for you shares, over the vesting price, that will be your CGT liability. It sounds like you will be below the CGT threshold but you may be required to submit a tax return. Although once you submit a tax return you will probably be required to submit one for ever more!

Two extra thoughts for the OP. (I) if you sold your entire allocation on the day of vesting there will be no CGT (as you have sold at the price they have vested and arrive in your hands), and (iI) the amounts are quite small (sorry) and will not have to be declared to HMRC - they only require declaration if you trouble the scorer on gains or make sales which are a multiple of the current CGT allowance.

Thanks all.

We have a similar long term incentive package (RSUs) at my work. The good news is that you almost certainly won’t pay CGT on it, the bad news is that you will almost certainly pay income tax (and NI) at your marginal rate. It will likely be done for you though.

It doesn’t matter what you are paid in shares, fine wine, goats. It will still classed as income and taxed accordingly.

Thanks GF

Update: apparently, my company will automatically deduct the income tax and NI in May, when the tranche matures. So I should apparently be prepared for the hit in my salary come payday.

I then have to (if I wish) sell the shares via the e-trade portal, and claim the funds into my bank account.

I then have to (if I wish) sell the shares via the e-trade portal, and claim the funds into my bank account.

I recommend Wise for getting the money out. (At least at the time I did the maths on this, which was a while ago tbf) It's the cheapest way to get the money into the UK. Fx rates sure the take shine off RSUs granted in the US!

If you have space in an ISA and intend on holding the shares you should totally sell them on etrade and rebuy in your ISA, otherwise you may end up with a future capital gains burden (if you're lucky!).

@codybrennan Your company will probably "sell to cover" some of your shares to pay the NI/Tax so you won't see a hit on our May payroll.

Thanks chvck. I hadn't even thought of that, cheers for bringing it up.

tonyg- cheers. Seems that was an undisclosed option for us when the shares were given out. I wish they'd mentioned this, too late now it seems.