Profit on company shares and CGT..how much will I pay?

Yeah I know..some will say I’m a tax dodger etc, but I plan to play by the rules set by hmrc.

Basically my company does a share buy option thing over 3 years. I’ve got the opportunity to now buy 25k’s worth of shares for 18k, so a tidy 7k profit. When giving info on maturity instructions it says if you want to avoid CGT on any profits over 3k then transfer to a stocks and shares isa. I have 20k allowance available in the isa so that’s where most of it will go. The rest goes into a standard share dealing account from which I can sell subject to normal tax

But this is where I’m confused. The 18k I’ve spent on the shares (not profit), and the 3k CGT free allowance is greater than the 20k limit on the isa. I’ll end up with 5 k in the normal share dealing account. So what happens then?

1- of that 5 k, 4 is taxable under GCT rules. The other 1k is part of my allowance

Or

2- only 2k is taxed. The other 3 is part of my allowance and the don’t consider the other 2k profit that’s in the ISA when working out CGT

Any insight appreciated

Cheers

From what I recall in my company , often companies are able to do these employee share options tax free, as part of an HMRC approved share option scheme. Yours may be one of these, so the whole of the 25k would be tax free. But any increase in value above that £25k may be taxed.

Once the shares are available to you after the 3 years, then the £20k you put into an ISA continue to be tax free. The rest of the shares may be subject to CGT  if they increase in value – but only when you sell them. The first £3k of this value increase per year is tax free. Obviously you put the rest into an ISA the following year.

AIUI and happy to be corrected. At purchase you own £20 k shares in your ISA – they stay tax-free – and £5k in a shares account. You paid 18/25 = 72% so you paid £3.6 k for the ones now worth £5k outside the ISA. When you sell them, the profit you make (new value – 3.6 k) is taxed at the appropriate rate, with a £3 k allowance at the moment and tax rate depends on your tax status in that year that you sell. If you were able to buy and sell immediately then yes you would make a tidy profit, which is why most schemes require you to hold the shares for several years. Also make sure can put them in the ISA.

@konagirl

So based on that,  if the deemed profit is 1.4k with an allowance of 3k then I’d pay no capital gains at all?

I can defo put 20 in an isa and sell immediately according to the blub on the site. Likewise, If i dont utilise the isa ill get taxed on everything over my allowance

yes, if you were able to sell straight away the profit outside the isa is £1.4 k and within your allowance.

My company share scheme,albeit some time ago, was all tax free if held for a min qualifying period.  I actually still have some, just reinvested all divis.

Can you max out your isa and put the rest into a sip.

Ianafa

So based on that, if the deemed profit is 1.4k with an allowance of 3k then I’d pay no capital gains at all?

Yes

can defo put 20 in an isa and sell immediately according to the blub on the site. Likewise, If i dont utilise the isa ill get taxed on everything over my allowance

Yes and yes.

If you were able to buy and sell immediately then yes you would make a tidy profit, which is why most schemes require you to hold the shares for several years

I think you are mixing up Sharesave and Sharepurchase.

Also worth noting, in case your next tranche has a better return, that you can transfer into an ISA only within 90 days of exercising your option. So if you had too much CG to deal with in one £20k ISA subscription and £3k CGT allowance then you might want to exercise your option within 90 days of the new?tax year coming round. So you could put in £20 this year and £20 next year

Obviously you put the rest into an ISA the following year.

See above.

My company share scheme,albeit some time ago, was all tax free if held for a min qualifying period. I actually still have some, just reinvested all divis.

I think you are mixing up Sharesave and Sharepurchase.