Do i have to pay any tax on my shares?

Question

I was given a sum of shares for the company I work for 3 years ago and I am allowed to exercise these shares as of 22nd Jan. I have checked and the shares are approved by inland revenue, (which seems to imply that I don't pay income tax on them) but I've heard I may have to pay capital gains tax on these? Am I free to get all the share money or does a certain tax apply?..

Answer 1

Yes, capital gains tax will apply but only when you sell the shares.

If you don't need the money now, you need to consider whether to exercise the option now or leave it till later. It is crucial to your decision whether the scheme is an approved one so double check this point.

If it is approved (as you say) then it is usually beneficial to convert the option into shares as early as possible. There is no tax due when this is done, only when the shares are sold. Whilst you continue to work for the company the shares should qualify for business asset taper relief which will reduce any gains to 25% after only two years (which starts on the date you convert the option). Any gain over the annual exemption limit (£8,800 at the moment) will be taxed.

If it were to be unapproved then income tax would be payable on the difference betwen the market value when you convert and the price you pay. This is why you must confirm the approval.

Answer 2

There is NO capital gain tax.

Here it is how it works. If you don't sell your shares you never pay any penny for tax. If you get dividends, you don't pay tax neither. Because the company giving you the dividends they giving it to you after tax profit. You don't pay any income or capital gain tax at all.

But, if you sell it an make money from the sale of the shares, at that point you will have to pay income and capital gain tax, according how much you bought it for and which tax bracket are you in.

Answer 3

If you were given shares of stock in your company, there's nothing to "exercise" because you already own those shares.

But if you were given "options" or "rights," then that's different. What these mean is that you have the "option" at "your discretion" to buy shares.

In other words, you don't own or have the stock right now, but rather have the option to purchase shares of stock, usually at a lower or fixed price, sometime down the road. Whether or not you decide to actually do it is totally up to you.

But if you do "exercise" your option, meaning you do it, then YES you have to pay taxes.

Answer 4

Capital gains tax will Be applied,you pay tax on The profits.

Answer 5

Share sales are covered by captial gains tax (CGT). If the net increase in value of the shares when you sell causes you to exceed your anual allowance (currently £8200) then the gain will be liable for CGT.

Cheers.

Answer 6

you only pay tax on the dividends you get paid from the shares - and only then if you already pay standard rate tax. You need to declare the dividends as income on your tax return.

Answer 7

Only if you sell them. There is an annual cut off limit, and it is only on the profit. Your company is probably best placed to advise you.

Answer 8

I think you have to have them 5 years anything before then you pay. Thats what happened to mine anyway. Probably ripped off by some conman!

Answer 9

Only on the profit when you sell the shares, and then only if you've exceeded the threshold for CGT

Answer 10

you have to pay tax on everything