Shares and capital gains
Discussion
My wife has been given "please don't leave the company, here are some shares" incentives over the past 6 years or so and they have built up to a fairly tidy amount - company performance has seen a gain from about $10 to $60 a share over this period.
We are firmly into capital gains territory and would be happy to sell a chunk at the current market rate - have sold a handful this year and kept the gain below the threshold for paying CGT - my plan was to do the same next financial year and to keep going every year to avoid losing 24%
The question is - a chunk are vesting soon - could we sell them immediately with no CGT implications? There is no option (that I can tell) to stipulate which shares are sold - would obviously be looking to sell the batch which vested at ~$60/share than the ones that vested years ago at ~$10 - but no idea if it works that way...
Is there an easy answer, or is this a "speak to a professional" situation?
We are firmly into capital gains territory and would be happy to sell a chunk at the current market rate - have sold a handful this year and kept the gain below the threshold for paying CGT - my plan was to do the same next financial year and to keep going every year to avoid losing 24%
The question is - a chunk are vesting soon - could we sell them immediately with no CGT implications? There is no option (that I can tell) to stipulate which shares are sold - would obviously be looking to sell the batch which vested at ~$60/share than the ones that vested years ago at ~$10 - but no idea if it works that way...
Is there an easy answer, or is this a "speak to a professional" situation?
It’s been a while since I / we held company shares so may have changed but it always used to be based on when acquired ie first in was then first sold.
Given the meaness of the current CGT allowances it is possible to double that if shares are also transferred to a spouse and then sold.
Given the meaness of the current CGT allowances it is possible to double that if shares are also transferred to a spouse and then sold.
Parsnip,
Are the shares relating to a USA based company? If so, and if you take up alscar's excellent suggestion to split the shareholding between you and your wife to each get a CGT allowance of £3000, then there are significant costs involved. I did the same thing in 2020 (when the CGT allowance was much higher than at present) and the share administration company, Equiniti, required the share transfer document to be subject to what is called a Medallion Guarantee (I think something specific to USA transactions). Anyway, getting the MG stamp on to the share transfer document cost a fee of about £500, paid to the company that was willing to provide the MG. And finding a company in the UK that is aware and prepared to provide the MG was quite a task.
I mention this because what may seem a simple task can get complicated and expensive.
There's plenty of info available about MG via Google if you are interested.
R.
Are the shares relating to a USA based company? If so, and if you take up alscar's excellent suggestion to split the shareholding between you and your wife to each get a CGT allowance of £3000, then there are significant costs involved. I did the same thing in 2020 (when the CGT allowance was much higher than at present) and the share administration company, Equiniti, required the share transfer document to be subject to what is called a Medallion Guarantee (I think something specific to USA transactions). Anyway, getting the MG stamp on to the share transfer document cost a fee of about £500, paid to the company that was willing to provide the MG. And finding a company in the UK that is aware and prepared to provide the MG was quite a task.
I mention this because what may seem a simple task can get complicated and expensive.
There's plenty of info available about MG via Google if you are interested.
R.
A quick off topic question.
If I were to sell a share holding worth a total of £1,000, which includes a £500 capital gain, does this sale need to be declared to HMRC in any way, bearing in mind that the capital gain of £500 is below the current CGT threshold of £3,000?
For background info, and in case it makes a difference, I am a company director and submit a Self Assessment every year based on income comprising salary & dividends.
If I were to sell a share holding worth a total of £1,000, which includes a £500 capital gain, does this sale need to be declared to HMRC in any way, bearing in mind that the capital gain of £500 is below the current CGT threshold of £3,000?
For background info, and in case it makes a difference, I am a company director and submit a Self Assessment every year based on income comprising salary & dividends.
You need to calculate gains through average share price. There are examples on the hmrc site designed to help with tax returns.
The key is that if you sell shortly before an acquisition, you can benefit from "bed and breakfast" rules, which means the new shares are really added to your s104 holding and therefore not liable to cgt.
Recommend looking up the rules on hmrc, and combining that with chat gpt (might nee like a sub, and usual caveats around not trusting it blindly apply)
The key is that if you sell shortly before an acquisition, you can benefit from "bed and breakfast" rules, which means the new shares are really added to your s104 holding and therefore not liable to cgt.
Recommend looking up the rules on hmrc, and combining that with chat gpt (might nee like a sub, and usual caveats around not trusting it blindly apply)
SHutchinson said:
Jon39 said:
At the moment share options mature, can they still be transferred directly into a S&S ISA?
(Subject to ISA limits etc.)
Be careful here. There are various different flavours of share option and gifted share schemes, each with different tax implications. Usually someone who runs the scheme for the employer should be able to explain everything for you.
Jon39 is talkng about SAYE schemes where shares can be transferred direct to ISA without tax.
Other schemes simply let you acquire shares at a discount although you're still fully liable for CGT.
You need to establish exactly what you've got and then work through the tax implications.
Jon39 is talkng about SAYE schemes where shares can be transferred direct to ISA without tax.
Other schemes simply let you acquire shares at a discount although you're still fully liable for CGT.
You need to establish exactly what you've got and then work through the tax implications.
Panamax said:
Be careful here. There are various different flavours of share option and gifted share schemes, each with different tax implications. Usually someone who runs the scheme for the employer should be able to explain everything for you.
Jon39 is talkng about SAYE schemes where shares can be transferred direct to ISA without tax.
Other schemes simply let you acquire shares at a discount although you're still fully liable for CGT.
You need to establish exactly what you've got and then work through the tax implications.
I presumed the OP was talking about SIP shares that are now over the 5yr period. You are 100% correct that the specifics should be checked.Jon39 is talkng about SAYE schemes where shares can be transferred direct to ISA without tax.
Other schemes simply let you acquire shares at a discount although you're still fully liable for CGT.
You need to establish exactly what you've got and then work through the tax implications.
They are not SAYE or SIP.
Essentially they were a bonus with a clawback clause - gifted on paper in year 1, but not in the pocket until year 3/4/5/6 and appear on my wife's payslip when they vest.
I'm in two minds - take professional advice and take a wedge out, or just keep it below the CGT threshold and drip feed them out. Being able to take a chunk out now CGT free would have been a nice bonus and if it was a straightforward "yeah, easy, and here is the HMRC website to prove it" then I'd be going for it, but it doesn't seem that way.
Essentially they were a bonus with a clawback clause - gifted on paper in year 1, but not in the pocket until year 3/4/5/6 and appear on my wife's payslip when they vest.
I'm in two minds - take professional advice and take a wedge out, or just keep it below the CGT threshold and drip feed them out. Being able to take a chunk out now CGT free would have been a nice bonus and if it was a straightforward "yeah, easy, and here is the HMRC website to prove it" then I'd be going for it, but it doesn't seem that way.
I think I’m as risk of possibly having some CGT to pay this year.
My late mum left money in a trust for her children, the relevant values for CGT are, I think, the value on day of death compared to the value on the day that the trust pays out, which was a couple of months after death. The value went up over that time and I think CGT can apply to that difference in value. I ll be liaising with a professional advisor to clarify.
My late mum left money in a trust for her children, the relevant values for CGT are, I think, the value on day of death compared to the value on the day that the trust pays out, which was a couple of months after death. The value went up over that time and I think CGT can apply to that difference in value. I ll be liaising with a professional advisor to clarify.
Parsnip said:
They are not SAYE or SIP.
Essentially they were a bonus with a clawback clause - gifted on paper in year 1, but not in the pocket until year 3/4/5/6 and appear on my wife's payslip when they vest.
I'm in two minds - take professional advice and take a wedge out, or just keep it below the CGT threshold and drip feed them out. Being able to take a chunk out now CGT free would have been a nice bonus and if it was a straightforward "yeah, easy, and here is the HMRC website to prove it" then I'd be going for it, but it doesn't seem that way.
Taking Rogers point about the potential USA issue in terms of transfers to my point about the transfer in the first place to you ,it might be worth a quick chat with HR or indeed the Company Secretariat dept. Essentially they were a bonus with a clawback clause - gifted on paper in year 1, but not in the pocket until year 3/4/5/6 and appear on my wife's payslip when they vest.
I'm in two minds - take professional advice and take a wedge out, or just keep it below the CGT threshold and drip feed them out. Being able to take a chunk out now CGT free would have been a nice bonus and if it was a straightforward "yeah, easy, and here is the HMRC website to prove it" then I'd be going for it, but it doesn't seem that way.
Appreciate mine was for a UK company but it was the latter that supplied all the stock transfer paperwork each time.
NowWatchThisDrive said:
If she sells the exact vesting # shares on the same day as they vest then they will fall under the same-day matching rule - so likely negligible (if any) gain and no CGT - and whatever S104 holding existed prior to those shares vesting is unaffected.
I think we have a winner...The "Same day rule" search term helped me find this:
https://www.gov.uk/government/publications/shares-...
Excerpt from that link:
When you dispose of shares you cannot work out your capital gain or loss until you have matched the shares disposed of with shares you acquired. You’re treated as disposing of shares in the following order:
First: Shares acquired on the same day as the disposal (the ‘same day’ rule).
Second: Shares acquired in the 30 days following the day of disposal (the ‘bed and breakfasting’ rule) provided the person making the disposal was resident in the UK at the time of the acquisition.
Third: Shares in the Section 104 holding.
If these rules fail to exhaust the shares disposed of, the remaining shares are matched with later acquisitions, taking the earliest one first.
Which I think explains it - sell shares on the day they vest and it is basically a zero sum game. Sell them 30 days prior to vesting and you use the sold shares to give you the value to work out CGT. Sell them outwith these two rules and it considers the shares as as a singular pot.
I think it might still be worth a chat with an advisor prior to doing anything, but sounds like there is a tax efficient way to get rid of at least some of them.
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