Capital gains tax on shares is charged at 10% or 20%, depending on your income tax band. This guide shows you how to calculate your bill.
Share-incentive plan (SIP)
This is when you are awarded shares, or buy shares, that are held in the plan for you.
There is no CGT while the shares are in the plan, nor when the shares are eventually transferred to you.
At the time of transfer, you are treated as acquiring the shares at their market value, and this forms the basis of calculating any taxable gain or loss when you later dispose of the shares. This means that, if you sell immediately, there shouldn’t be any CGT to pay.
With this option, you’ll save monthly to build up savings that earn a tax-free bonus over a period of three, five or seven years.
At the end of that time, you can either withdraw your savings as cash or use them to buy shares in your employer’s company at a price set at the time the plan started.
When you sell the shares, you might have a taxable gain or loss. This is generally based on the sale price, minus the price you bought the shares for.
Company share-option scheme (CSOP)
You’re given the option to buy shares in the company you work for at a set future date, at a set price – this can’t be less than the market value of the shares on the date the option is granted.
Assuming you take up the option, when you sell the shares, you might make a taxable gain or loss.
Generally, this is based on the sale price, minus the price at which you acquired the shares under the option, minus anything you paid for the option itself.
Enterprise-management incentive (EMI)
You’re given the option to buy shares in the company at a set future date, at a set price.
If the set price is less than the market value of the shares on the date the option is granted, this perk counts as part of your pay on which you have to pay income tax.
If you take up the option, you might make a taxable gain or loss when you come to sell the shares.
This is based on the sale price, minus the price at which you acquired the shares under the option, minus anything you paid for the option itself, and minus any amount on which you paid income tax when the option was granted.
When you get employee shares from a SIP or SAYE plan, any increase in value is ignored if you transfer them within 90 days to an Isa or a personal pension.
Because Isas and personal pensions are CGT-free, this means there’s no capital gains tax when you eventually sell the shares. Note that this also means you won’t get any relief for losses, either.