Employee shareholder
What tax advantages do I have?
Who is an Employee Shareholder?
An employee shareholder is an employee who owns shares in the company that were worth £2000 when they got them.
When you own shares you have to think of 3 taxes:
- ● Income Tax
- ● National Insurance
- ● Capital Gains Tax
Income Tax and National Insurance
No Income Tax is paid on the shares uptil £2000
Capital Gains Tax
If you got the shares before 17 March 2016 you will not pay any capital gains tax on selling the shares that were worth upto £50 000 when you got them.
If you got shares after 17 March 2016 you will only pay Capital Gains Tax when you sold your shares and made a gain of over £100 000 during your lifetime.
Your employer might as well offer you a salary package that includes shares. Every individual case is different, however since you get some tax advantages when you are offered shares through a certain scheme which we will discuss below you will be able save some money which otherwise you might be paying in your taxes,
What are these Schemes?
- ● Share Incentive Plans
- ● Save as you earn
- ● Company Share Option Plans
- ● Enterprise Management Incentive
Share Incentive Plan
Your employer can offer you shares through the Share Incentive Plan through Free shares( offering shares of worth upto £3600), Partnership shares( Where you can buy shares from your salary before any taxes are deducted), Matching Shares, Dividends Shares.
How Is it Tax Advantageous?
You won't have to pay any income tax or NI as long as you keep your shares in the plan for 5 years.
If your shares were under the plan when you sell them you won't have to pay any Capital Gains Tax on the profits that you make. However, if you have taken them out of the plan and then sell them where they have increased in value then you might have to pay CGT. For more information on this you can contact our team of accountants ,
Save As You Earn
Under this Scheme your Employer will offer you a Savings Contract. Under this Contract you can save upto £500 and then buy shares for a fixed price. The period of the contact can be 3 to 5 years,
How Is it Tax Advantageous?
You won't have to pay any income tax or NI on the shares when you buy them. The interest and any bonus at the end is tax free.
However, you will have to pay Capital Gains Tax when you sell the shares unless you transfer them to ISA within 90 days of the scheme ending or to a pension directly from the scheme.
Company Share Option Plan
If you are offered this plan you can buy shares worth £30 000.
How Is it Tax Advantageous?
You won't have to pay NI or Income Tax when you buy the shares on the difference between what you paid for them and what they were actually worth.
You will be paying CGT on the shares when you sell them.
Enterprise Management Incentive
This applies when you work for a company with a value of 30 million or less.
You won't be paying Income Tax or NI if you buy the shares at the market value, however if you buy shares at a price which is less than the market value you will have to pay Income tax or NI.
You will have to pay CGT as well when you sell them.
Tax Implications are Summarised below in the table
| Share Plan | Will I pay Income tax or NI | Will I pay CGT |
| Share Incentive Plan | No as long as the share are in the plan for 5 years | No as long as the shares are under the plan |
| Save As You Earn | No | No. but in certain conditions you will |
| Company Share Option Plan | No | Yes |
| Enterprise Management Incentive | No but with certain conditions you will have to pay | Yes |
For more Information contact our expert team of accountants in Croydon, accountants in London and we advise you on the tax implications of your salary packages, tax implications if you own shares, how to report the shares and if you have to fill in your self assessment tax returns contact here:https://taxaccolega.co.uk/contact-us.
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