What Individuals Can Do to Protect Their Maturing Share Schemes from Tax.


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 it good 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 a potential capital gains tax (CGT) liability?

WEALTH at work, a leading provider of financial education, guidance and advice in the workplace, works with many employers to offer financial education to their employees to help them understand the opportunities available to them.

Jonathan Watts-Lay, Director, WEALTH at work, comments;

“If an employer offers a SAYE share scheme it is usually a good idea for individuals 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 potential CGT and manage it in the most tax-efficient way.

Firstly, the sale of shares from a maturing SAYE schemes can be split over two consecutive tax years, meaning that £22,600 of gains rather than the annual Exempt Amount of £11,300 could be sheltered from CGT. Don’t forget transfers to a spouse or civil partner are exempt from CGT and by doing so, individuals can make use of their partner’s CGT allowance.  It should be noted that the transfer to a spouse or civil partner should be considered as an outright gift. Also, whilst deferring the exercise of the option, the value of the shares can of course fall as well as rise and is therefore at market risk during this period.

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 transfer shares 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 £40,000 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) and there will also be ISA charges to consider.”

The latest news is brought to you by WEALTH at work, a leading financial wellbeing and retirement specialist. WEALTH at work and my wealth are trading names of Wealth at Work Limited which is a member of the Wealth at Work group of companies.

Links to websites external to those of Wealth at Work Limited (also referred to here as 'we', 'us', 'our' 'ours') will usually contain some content that is not written by us and over which we have no authority and which we do not endorse. Any hyperlinks or references to third party websites are provided for your convenience only. Therefore please be aware that we do not accept responsibility for the content of any third party site(s) except content that is specifically attributed to us or our employees and where we are the authors of such content. Further, we accept no responsibility for any malicious codes (or their consequences) of external sites. Nor do we endorse any organisation or publication to which we link and make no representations about them.