What individuals can do to protect their maturing share schemes from tax.

4th August 2016

Save As You Earn (SAYE) schemes offer employees the security that if markets fall, they will get back their original savings; but if their company does well and their share price rises, they have the chance to realise what for many could be ‘life changing’ amounts when they mature.

So is now a good time to save in these schemes, and for those employees with schemes that have recently matured, or are due to mature soon, what can they do to reduce, or even eliminate their capital gains tax (CGT) liability?

Jonathan Watts-Lay, Director, WEALTH at work, a leading provider of financial education in the workplace, supported by guidance and advice, comments;

“If an employer offers a SAYE share scheme it is usually a good idea to pay money in. They really are the best of both worlds, with the chance to realise significant sums at maturity if the company’s share price does well, and if it doesn’t then your saving is returned in full. However it is risky to have most of your investments with the company you work for, so if you are in that situation, once they mature it might be worth considering   a broader range of investments.

“For those in schemes that have recently matured, or are due to mature soon, there are a few things that individuals can do to protect their windfall from CGT and manage it in the most tax-efficient way.

“Firstly, the timing of many SAYE schemes means that the CGT liability can often be split over two consecutive tax years, meaning that £22,200 rather than £11,100 of gains could be sheltered from CGT. Don’t forget transfers to a spouse or civil partner is exempt from CGT and by doing so, individuals can make use their partners CGT allowances.  It should be noted that the transfer to a spouse or civil partner should be considered as an outright gift.”

“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 individuals 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 doing transfers 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 £30,480 of your share scheme capital to be invested into a tax efficient ISA wrapper.”

“Those 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 remember that for the brief time they hold the shares, they are exposed to market risk (for example, if there was a sudden share price crash).”

For further information, please contact

Cath Roan, Roan Media, 07801 817 451 or email cath@roanmedia.co.uk

WEALTH at work press office on 0151 255 3468 or email rachel.d.alderton@wealthatwork.co.uk

WEALTH at work is a leading provider of financial education and employee wealth management services in the workplace. WEALTH at work provides a service which helps employees to understand how to maximise the value of their benefits by providing financial education tailored to the needs of individual companies and of different employee groups within those companies. This is then supported by a flexible savings platform and investment advice service which allows, for example, the linking of company share schemes to pensions and ISAs, retirement income planning for retirees and specialist support and guidance for senior executives. For more information, visit www.wealthatwork.co.uk