Author Topic: Tax on Share Incentive Plan  (Read 561 times)

snabzter82

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Tax on Share Incentive Plan
« on: August 01, 2017, 02:26:25 PM »
Hello. First time posting here and I am hoping someone can help. I recently left my old job where I had access to the company's share incentive plan scheme. The scheme was relatively generous in that for every four shares I bought I got one matching share. I also got dividend shares purchased for me whenever the company paid dividends. The shares were purchased using money from my salary each month before income tax and NIC was paid, meaning I was saving a fair amount in tax.

As I resigned from my job to go to a new job I need to pay tax and NIC on shares that have been in the plan for less than 5 years. I received a letter saying how many shares the tax and NIC is due on and I agree with the figure so I am happy with this.

My question is on how the tax and NIC is calculated. I am a higher rate tax payer and it is not clear to me whether income tax and NIC has been calculated at the basic rate or at the higher rate. Is anyone aware of a calculator for doing this? I asked the company that adminsters the scheme but I am still not sure as the answer wasn't clear and I had to go somewhere so couldn't spend long on the call. I want to make sure I put money away if more tax is due.

Thanks for any help.

Playing with Fire UK

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Re: Tax on Share Incentive Plan
« Reply #1 on: August 06, 2017, 01:19:04 AM »
If it is like my scheme, you are taxed at your marginal rate at the time that you leave.

So it is as if the value of the shares have been added to your salary/other benefits this year. If that would push you into a higher tax band then you will pay more tax.

If you are a higher rate tax payer and won't be pushed into additional rate or the personal allowance clawback, then you will be taxed 42% for tax and NI.

snabzter82

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Re: Tax on Share Incentive Plan
« Reply #2 on: August 06, 2017, 03:46:43 AM »
Thanks for the reply. I looked into the figures I paid and worked out how the tax was calculated. It is exactly how you describe. Sadly it means another 500 in tax is due despite already paying 3.5k.