SHAREVIEW. Your guide. to tax planning for your Sharesave maturity. Keeping it simple

Transcription

1 SHAREVIEW Your guide to tax planning for your Sharesave maturity Keeping it simple

2 Typically, when a Sharesave contract matures and the options are exercised, no tax liability is incurred at that stage. However, if any of the shares acquired are sold or transferred, either immediately or later, there may be a Capital Gains Tax liability. Capital Gains Tax (CGT) CGT may be payable if the amount you receive on selling or transferring shares is greater than the cost of buying them. The difference between the value on disposal and cost to buy the shares is the capital gain. Each year you can realise capital gains up to a Government set limit, known as the Annual Exemption, without having to pay CGT. The Annual Exemption in the 2014 / 2015 tax year has been set at 11,000. For gains above the Annual Exemption for the tax year 2014 / 2015 tax year, CGT will be charged at 18%, or 28% if you are a higher rate tax payer. There are several legitimate ways in which gains may be reduced or eliminated so that less or no CGT is payable. These include: Annual Exemption Gifts to your Spouse Individual Savings Accounts Making use of the Annual Exemption If selling any or all of your shares would mean that your capital gain exceeds the Annual Exemption, you may have to pay CGT on the excess. You could choose to sell only some of your shares in that tax year. You could also decide to sell some shares in one tax year and some in the next tax year. In this way, you may be able to use one tax year s Annual Exemption for the first sale and the next year s Annual Exemption for the second sale. Gifts to your Spouse * HM Revenue and Customs (HMRC) treats the gift of shares as if a sale has taken place, with the market value of the shares on the date that the gift was made being used to calculate the amount of capital gain. However, a gift to a spouse is not treated in this way. In normal circumstances, gifts of shares between spouses are usually free of any liability to CGT. The spouse receiving the shares is treated as if he / she had acquired these shares at the price paid / value received, by the spouse giving the shares. Each spouse is entitled to his / her own Annual Exemption, so by making a gift between spouses it may be possible to use both your Annual Exemption and that of your spouse (total 22,000 gains free of CGT for tax year 2014 / 2015) when selling shares. *All references to spouse in this document include a civil partner. Note: If capital gains have also been made on disposal of other assets during the tax year, all of these gains are added together to calculate if the total gains have exceeded the Annual Exemption for that tax year. The Annual CGT Exemption in the 2014 / 2015 tax year has been increased to 11,000 Individual Savings Accounts (ISAs) The sale of shares within an ISA is free of CGT. There is no time limit as to how long the shares have to remain in the ISA before they can be sold. In addition, if shares are transferred into an ISA from a HMRC Approved All Employees Scheme run by an employer scheme, such as Sharesave, within 90 days of the exercise date, then the transfer of these shares to the ISA does not attract CGT. The date of the release from the scheme is normally the date shown on your share certificate, or noted on the letter you may receive from your Sharesave administrator which confirms the closing date of your savings account. Please note, shares gifted to your spouse or civil partner cannot be transferred into an ISA in this way. If you choose to put shares you already own into your ISA, you will need to sell them and buy them back within the ISA. This process is called BED and ISA. Commission is payable on the sale and re-purchase of the investments. You may be liable to pay 1 July April 2015 Stocks and Shares ISA limit 15,000 (less any contributions made to a Cash ISA or your Stocks and Shares ISA since 6 April 2014) CGT on any gains made when you sell these shares. From 1 July 2014 to 5 April 2015, the ISA allowance is 15,000. You are free to choose how you allocate your funds between a Cash ISA and a Stocks and Shares ISA and will have the ability to transfer funds between your Stocks and Shares ISA and Cash ISA. Equiniti s Shareview Dealing ISA A self-select Stocks and Shares ISA is offered by Equiniti through our Shareview Dealing service. The Shareview Dealing ISA offers competitive rates, easy online and telephone access with a straight forward ISA and shares transfer process. Plus, if you reach your ISA allowance you can carry on investing with your Equiniti Investment Account, which has no administration fees, giving you complete visibility of your portfolio. Cash ISA limit 15,000 (less any contributions made to a Stocks and Shares \ ISA or your Cash ISA since 6 April 2014) If you would like to subscribe to the Shareview Dealing ISA, but you have an existing ISA for the current tax year (or ISAs for the previous tax years) with another ISA Manager, you may like to benefit from having your ISAs with a single provider. Please note that you may be charged a fee from your existing ISA Manager to transfer your ISA. An ISA transfer can often take between 4 and 6 weeks to complete. Apply now Call (Monday Friday 8.00am to 6.00pm, UK time, excluding Bank Holidays) Apply online at If you would like details of the Shareview Dealing ISA / Investment Account and application forms posted to you, please contact us. No CGT on the transfer and any future sales within the ISA if you transfer shares (up to the value of 15,000) into a Stocks and Shares ISA within 90 days of the shares being released from your SAYE. 2 3

3 Scenario A No tax planning Scenario B With tax planning Number of Shares 2,000 2,000 Shares transferred to an ISA 15,000 Stocks & Shares ISA = 1000 ( 15,000 / 15*) *Share price used to calculate the amount of shares - (1000) Transfer half of the remaining shares to spouse - (500) Shares remaining in employee s name 2, CGT Calculation Proceeds if non ISA shares sold at 15 30,000 15,000 (1,000 non ISA shares sold) Example Proceeds if shares sold in ISA at 15 (Free from CGT) - 15,000 Total proceeds 30,000 30,000 This example shows how tax planning can be combined to minimise any CGT liability for an employee who wishes to sell their shares after exercising their Sharesave option. It assumes that the employee and spouse have not used their Annual Exemption, or made any other capital gains and that the employee has not taken out any other ISA in that tax year. We assume the employee has acquired 2,000 shares at 5 following the maturity and exercise of a Sharesave contract and that the shares are currently worth 15 per share. Less cost of shares (2,000 x 5) ( 10,000) - (1,000 x 5 Non ISA shares for CGT calculation) - ( 5,000) Profit liable to CGT from shares sold 20,000 10,000 ( 15,000-5,000) Less Annual Exemption(s) 11,000 22,000 Net gain liable to CGT (All shares sold) 9,000 NIL 4 5

4 Other points to consider on CGT Share Identification Rules If you have acquired shares in the same company at different times, care must be taken when selling these shares because of the CGT share identification rules (i.e. the CGT rules specifying which shares you will be treated as having disposed of in any situation). Again, you should seek professional assistance if you require further advice on this aspect. Self-Assessment If your capital gains for the tax year 2014 / 2015 are more than 11,000, then you need to report them to HMRC. It is your responsibility to notify HMRC of any taxable situations which may arise relating to you, whether you receive a Tax Return or not. Failure to do so may result in penalties being imposed on you. Simply because you do not receive a Tax Return to complete, does not mean that a Tax Return does not need to be completed. If, when the shares are disposed of, a liability to CGT is unavoidable, any tax payable on the gain will be due by the 31 January following the end of the tax year in which the disposal was made. In other words, if you dispose of shares in the tax year ending 5 April 2015, any CGT due would be payable by the 31 January Further assistance on tax In a standard document of this type it is only possible to outline some of the tax implications in the UK, of exercising Sharesave options and to provide some general information on certain related tax planning opportunities. The information contained here is not comprehensive, nor is it specifically tailored to individual circumstances, and you are recommended to seek specialist tax advice, where appropriate. Equiniti Investment Account If you have transferred shares up to the annual limit for a Stocks and Shares ISA and you have a residual balance, or if you are thinking of diversifying your portfolio, you may want to consider holding these shares in an Investment Account. You can trade in UK and international shares, investment trusts, bonds, unit trusts and gilts. Trading can be easy and cost effective with commission as low as per trade if you trade online with an Investment Account* (which allows you to hold stock in a paperless format). *NB whilst you will continue to receive dividends, because the shares are registered in the name of the Nominee, you may not receive all shareholder benefits and communications such as Annual Reports. Please note that all the information in this brochure is based on the Government s 2014 Budget Statement, and the legislation was introduced in the Finance Bill Further details can be found at The Shareview Dealing ISA offers competitive rates, easy online and telephone access with a straight forward ISA and shares transfer process. Plus, if you reach your ISA allowance you can carry on investing with your Equiniti Investment Account, which has no administration fees, giving you complete visibility of your portfolio. 6 7

5 Equiniti is the UK s leading provider of share registration, investor services and employee share plans, acting for around half of the FTSE 100 companies and 36 per cent of the FTSE 250. Equiniti is responsible for 17 million shareholder accounts and over 1 million employee records and in 2013 was recognised as the Best Shareholder Services Provider at the Shares Awards. Contact us: Certificated trading: T: * ISA and Investment Account information: T: * *Lines are open Monday to Friday 8:00am to 4:30pm for trading, and until 6:00pm for general enquiries. Shareholder support: T: Calls to this number are charged at 8p per minute plus network extras. Lines are open 8:30am to 5:30pm Monday to Friday. Subscribe to our publications Shareview Newsletter: Shareview Newsround: WINNER Best Shareholder Services This guide provides a basic outline of the UK tax treatment applying to shares acquired under Sharesave schemes maturing in the 2014 / 2015 tax year. You should note that tax legislation and the applicable rates may change in the future. The information contained in this booklet is not comprehensive, nor tailored to individual circumstances. If you are in any doubt about the tax implications you should seek specialist tax advice. The Shareview Dealing ISA and the Equiniti Investment Account are provided by Equiniti Financial Services Limited. Equiniti Limited and Equiniti Financial Services Limited are part of the Equiniti group of companies and whose registered offices are Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA United Kingdom. Telephone Company share registration, employee scheme and pension administration services are provided through Equiniti Limited, which is registered in England and Wales with No Investment and general insurance services are provided through Equiniti Financial Services Limited, which is registered in England and Wales with No and is authorised and regulated by the UK Financial Conduct Authority, with reference Textel/Minicom: Calls to this number are charged at 8p per minute plus network extras. Equiniti are a corporate member (No. 323) of the Plain English Campaign and are committed to clearer communication. Equiniti Financial Services Limited is a member firm of the London Stock Exchange.