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Maturing Share Schemes
1st August 2014
Employees from companies such as Whitbread (owner of Costa Coffee), and BT are benefiting from maturing Save As You Earn (SAYE) share schemes this year, but what should employees do to make sure that these potentially life changing amounts aren’t eroded by Capital Gains Tax (CGT)?
Jonathan Watts-Lay, Director, WEALTH at work, used by many of the UK’s leading companies such as BT, M&S & GSK to provide financial education and regulated advice, comments, “There are a few key things that share scheme participants should consider to protect their windfall from Capital Gains Tax (CGT) and manage their windfall in the most tax-efficient way.
“The timing of many SAYE schemes means that the CGT liability can be split over two consecutive tax years. This means that £22,000 rather than £11,000 of gains could be saved from CGT. Consideration should also be given to using the CGT allowances of a spouse or civil partner. Participants also don’t have to pay CGT if they carry out an ‘in specie’ transfer into an ISA within 90 days of exercising the option. Many high street ISA providers can’t facilitate an in specie transfer so employees would need to use a workplace ISA, or a specialist provider.
“It may be possible to reduce the potential CGT liability further by doing transfers to an ISA over two consecutive tax years, shielding £30,000 of capital.”
“Those who want to cash in their shares can mitigate CGT by transferring shares into an ISA before selling them and withdrawing the money. However it is important to remember that for the brief time they hold the shares they are exposed to market risk for example if there was a sudden share price crash.
“For most individuals, if an employer offers this type of share scheme it is a good idea to invest. However if the bulk of an employee’s savings are in shares of the same company for which they work they should consider diversifying to a broader spread of investments as each scheme matures. If the company were to struggle, they could lose their job and savings, as we saw during the financial crisis.”
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