How to help employees protect their maturing share schemes from tax.


Employees from many leading companies are benefiting from maturing Save As You Earn (SAYE) share schemes this year, but what can they do to make sure that these potentially life changing amounts aren’t eroded by Capital Gains Tax (CGT)?

WEALTH at work, a leading provider of financial education, guidance and advice in the workplace, works with many employers to offer financial education to their employees to help them understand the opportunities available to them.

Jonathan Watts-Lay, Director, WEALTH at work, comments;

“There are a few key things that share scheme participants should consider to protect their windfall from Capital Gains Tax (CGT) and manage it in the most tax-efficient way. Firstly, the CGT liability can often be split over two consecutive tax years, meaning that £22,600rather than £11,300 of gains could be sheltered from CGT. Don’t forget transfers to a spouse or civil partner are exempt from CGT and by doing so, you can make use of their partner’s CGT allowance.  It should be noted that the transfer to a spouse or civil partner should be considered as an outright gift. Also, whilst deferring the exercise of the option, the value of the shares can of course fall as well as rise and is therefore at market risk during this period.

Employees can also carry out an ‘in specie’ transfer into an ISA within 90 days of exercising the option and any gain on the shares transferred is exempt from CGT.  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.

Due to the timing of many SAYE scheme maturities, it may be possible to reduce a potential CGT liability further by transferring shares to an ISA over two consecutive tax years, so long as the 90 day period straddles the tax year end.  This would potentially allow up to £40,000 of an individual’s share scheme capital to be invested into a tax efficient ISA wrapper.

Employees 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 for employees to note that for the brief time they hold the shares, they are exposed to market risk and there will also be ISA provider charges to consider.

Employees also may want to consider diversifying their shares to a broader spread of investments as each scheme matures as  having all your eggs in one basket is considered a high risk approach. It is often advisable to spread investments as widely as possible and thereby reduce the risk of being exposed to the movements in price of just one company.

We work with many organisations to help their employees understand how to hold their investments in a manner which is not only tax efficient but can help avoid taking more risk than they may wish to.”

Further coverage can be found in Employee Benefits, The HR Director, Personnel Today and Reward Guide.

For more information, please contact us.

Contact Jonathan


IMPORTANT – External links please read: Virus status

*Contents of links to external websites
Links to websites external to those of Wealth at Work Limited  (also referred to here as ‘we’, ‘us’, ‘our’ ‘ours’) will usually contain some content that is not written by us and over which we have no authority and which we do not endorse. Therefore please be aware that we do not accept responsibility for the content of any third party site(s) except content that is specifically attributed to us or our employees and where we are the authors of such content. Nor do we endorse any organisation or publication to which we link and make no representations about them.

Investment decisions
Please note that the content of this website including any external articles to which it links are not financial advice and must not be relied upon to make investment decisions.  Further, please note that investments can fall as well as rise and that if investing you may get back less than you originally invested.

Subscription only sites
Where we have been quoted in an article or we are the authors of an article held on a third party website we may provide a link to that site, even though it is a subscription only publication.  Please note that by doing so we are not advertising the subscription nor are we suggesting that you should subscribe. We are merely providing a link for those people who already have a subscription should they wish to read the article. If you do not have a subscription then often only the first lines of an article may be available to read. You should not rely on that limited content to form a view of what the whole article may say or conclude. Often a headline or an excerpt of an article are not representative of the article in full. Reading a part only and/or out of context may be misleading and must not be relied upon.