Avoiding Tax When Selling Company Stock from a Sharesave Scheme: A Guide

Avoiding Tax When Selling Company Stock from a Sharesave Scheme: A Guide

Transferring Sharesave Scheme Proceeds to Minimize Capital Gains Tax

If you have £30,000 saved in a Sharesave scheme that is due to finish in August, you might be concerned about the potential capital gains tax (CGT) liability when you sell the shares. Here's a guide on how to efficiently transfer the Sharesave (SAYE) scheme shares to you and your partner’s Individual Savings Accounts (Isas) and Self-Invested Personal Pensions (Sipps), while minimizing CGT.

In-specie transfer of SAYE shares

The in-specie transfer option available for SAYE shares allows you to transfer shares directly into Isas without having to sell first. This avoids crystallizing a CGT gain at the point of transfer, which would happen if you sold and then repurchased inside the Isas or Sipps.

Value limits

The maximum value you can put into an Isa or Sipp through this transfer method is capped at £20,000 per person each tax year. Thus, for you and your partner, you can each transfer up to £20,000 worth of shares annually.

ISA provider selection

Not all ISA providers accept in-specie transfers from employee share schemes. It's essential to find an ISA provider that explicitly supports this type of transfer to benefit from this route.

Exceeding ISA limits

If your SAYE shares exceed your Isa allowance, you can't transfer the excess directly this way. One strategy to spread the tax liability over time is to use "bed and Isa" — sell shares outside the Isas, realize gains within your CGT allowance, and then buy back shares inside the Isas. However, selling shares outside can trigger CGT. To mitigate this, you and your partner can transfer shares between yourselves without CGT (transfers between spouses/civil partners are exempt), allowing both of you to use separate CGT allowances and Isa limits effectively.

Avoiding the 30-day rule

Normally, buying back the same shares within 30 days after selling triggers anti-avoidance rules. However, if your partner buys the shares after you sell ("bed and spousing") or if you buy them inside an Isa after selling, this rule does not apply, allowing you to maintain your holdings while deferring or minimizing CGT.

Maximizing benefits

1. Exercise your SAYE options and within 90 days, transfer shares in-specie directly into your Isa and your partner's Isa separately, up to each £20,000 Isa allowance, to avoid CGT.
2. If you have more shares than your Isa limits, transfer shares between partners tax-free so gains can be split across two CGT allowances.
3. For any remaining shares, consider selling within your CGT allowance limits and then repurchasing inside an Isa or Sipp to shelter future growth from tax, using bed and Isa strategies carefully with regard to the 30-day rule.

This approach maximizes Isa tax benefits and CGT allowances, allowing you and your partner to minimize overall capital gains tax efficiently.

Other options

If you decide not to use a pension, your £3,000 annual CGT exemption, if available, could help offset the remaining gain. If necessary, you can use the CGT annual allowance over subsequent tax years, although this may mean carrying the risk of holding the single stock for longer.

If shares are gifted, the new owner would inherit the original option price of 30p per share as their base cost and may then face CGT on any future gains when selling.

If you're unsure about whether a particular investment wrapper such as an Isa or pension is suitable for your needs, it may be worth speaking to a financial adviser. Once inside a tax-efficient wrapper, the shares can be held or sold without incurring CGT, and the proceeds can be reinvested into more diversified investments.

When the scheme has matured and the shares are owned, the risk profile changes dramatically, as the shares are now high-risk, single company shares. HM Revenue and Customs generally allows shares to be gifted to a spouse or civil partner without triggering an immediate CGT charge.

Sharesave schemes, also known as Save As You Earn (SAYE), are programs offered by employers that allow staff to buy shares in the company at a fixed price. They are considered an excellent way to build savings, as they include a safety net if the share price falls below the set price.

1. To minimize capital gains tax (CGT) when selling shares from a Sharesave scheme, you could consider transferring the shares in-specie directly into Individual Savings Accounts (Isas) or Self-Invested Personal Pensions (Sipps).
2. It's important to note that the maximum value you can put into an Isa or Sipp through this transfer method is capped at £20,000 per person each tax year.
3. However, if your SAYE shares exceed your Isa allowance, you can transfer shares between partners tax-free, allowing both of you to use separate CGT allowances and Isa limits effectively.
4. After selling shares outside the Isas to offset any excess, consider buying back shares inside an Isa or Sipp using the "bed and Isa" strategy, being mindful of the 30-day rule.
5. If you're not keen on using a pension, your personal-finance strategy could include using your individual £3,000 annual CGT exemption and gadgets like smartphones to mitigate the remaining gain, or carrying the risk of holding the single stock for longer.

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