Re: Share Options. My employer wants to tax me through payroll before I have sold my share options.?

Question

Can I refuse and sort this out through the inland revenue myself? My employer has given me a form to authorise the deduction of tax and NI through payroll, however I want to pay tax & ni once I have sold the shares and not before. Am I making a fuss over nothing or am I within my rights to refuse and sort it out myself?

Answer 1

The sale of options is a matter for you and the taxman.
Don't sign the form if you don't want to.

Answer 2

Your employer is correct.....under S475 ITEPA 2003 the employee tax and NI charge on the grant of share options is waivered until the shares are actually released to the employee.

On the share options being released you are subject to income tax and national insurance as this is regarded as the receipt of income from your employment. When you sell the shares may be liable to pay capital gains tax.

Answer 3

I assume this relates to selling the OPTIONS rather than selling the Shares (most people do not actually excise the option rights to purchase the actual shares ..)

Example - you have 1000 options for Widget Co. shares at £5. After 3 years (or whatever it used to be to minimise Capital Gains Tax liability) the shares have reached £7.50.

If you decide to sell the OPTIONS (back to the Widget Co.) you receive 1000 x (7.50 - 5) = £2,500 from Widget Co. (most likely via Payroll) and I believe, you pay 18% Capital Gains Tax on that.

If you decide to excise the Option, you PURCHASE 1,000 shares at £5 (the option price), so you PAY Widget Co. £5,000 and they issue you 1000 shares (worth £7,500).