Trading the stockmarket (NO Referrals)

[dowie]

Okay is the gain from purchase price to sale (how much you paid) and how much you sell it for greater than £12,300?

(disclaimer, not a lawyer or accountant)

No, because it doesn't seem to be an approved scheme the gain (if applicable) is essentially from the market value on the day he makes the purchase, income tax and NI is due on the difference between the price he pays (the exercise price) and the market value, not CGT. so any CGT is only applicable beyond the amount on which he pays income and NI on - ergo exercising and selling immediately or shortly after should basically result in no or tiny GCT.

Thanks folks.

I'm not sure what the UK equivalent is to be honest as it differs from a share save scheme. It's an employee share purchase plan (US based company) that runs over 6 month periods. You put in a percentage of your salary and at the end of the 6 months you will (no choice) buy the stock at a discounted price. You pay income tax/NI contributions on the gain so this is why I'm keen to understand how you avoid CGT (and reporting) by selling as quickly as possible.

I guess the whole point is moot if the disposal proceeds are over ~£50K as I believe it would need to be reported even if there is no gain.

(disclaimer, not a lawyer or accountant)

So it sounds like a share option scheme that isn't in an HMRC-approved scheme. You mention being able to buy at a discounted price - I presume you're referring to a price that is set in advance and on a particular date? i.e. if you opt into this thing you're granted an option (the obligation to buy bit is a bit funny mind - so I am a bit unsure here)

The below is written under the assumption we're talking about some employee share option scheme.

This isn't advice but AFAIK, the basics of how options are taxed in the UK are:

Ordinary investor:

You purchase options on an exchange (paying the premium for them), if you sell the options then you make a gain or loss for CGT purposes (or indeed if they expire worthless) as these things have value themselves (the premium). If you exercise the options then the cost of the resulting shares are bundled together with the option premium for GCT purposes and there is no gain or loss until you sell the shares.

Employee in an HMRC approved scheme, for example, save as you earn scheme:

You're granted options by your employer, any notional premium is ignored even though you've just "earned" a thing of value, if they expire worthless then there is no GCT loss. You save in some savings account until expiry of the options (minor tax break on the interest here, realistically rates are low so meh). Upon expiry, you can choose to exercise the options if profitable to do so (using the savings from the special savings account), your cost for GCT purposes is based on the strike price/cost of the shares (similar to how an ordinary investor is treated), so you're (potentially) liable for GCT for the difference between that and the price you(eventually) sell at. (can be avoided by dumping into an ISA or pension). They like to say that you're getting to avoid income tax and NI via these schemes but you're (potentially) liable instead for CGT and they're basically treating you similarly to an ordinary investor (albeit ignoring any value/premium for the options you were granted).

Employee not in an HMRC approved scheme.

(This is the one that annoys me a bit in how they treat it and what I think you're referring to).

You're granted options by your employer, any notional premium for these options is ignored (as per above re: the approved schemes too). Upon expiry, you buy the shares (apparently you're forced to under your particular scheme, an option is generally the right but not the obligation to buy an underlying asset, but meh)
Apparently this is because of the risk of tax avoidance schemes but how HMRC now treats you is rather ****ty (IMHO). You're liable for income tax and NI (not CGT!!!)on the difference between the exercise price and the value of the shares at expiry - this is naff because if you want to hold onto the shares then, unlike an ordinary investor, your tax liability (which would otherwise be CGT) isn't deferred until the sale of the shares but is charged on an (as of yet) unrealised gain(!!!), you owe income tax and NI which must be paid via self-assessment that year even if you wish to hold onto the shares (this might strongly incentivise employees to sell in order to pay that tax bill).

Your cost for CGT purposes, unlike in the HMRC approved schemes or in the case for an ordinary investor, is not the exercise price (+ premium, if applicable) but rather the value of the shares at expiry (so you're liable for CGT beyond the amount which you owe income and NI on). If you do keep them then you have a potential gain or loss for CGT purposes from that point onwards - so in theory you could later make a loss having already been taxed (income and NI) on an unrealsied gain. IMO this is unfair but meh...

disclaimer - not a lawyer/accountant The above is not advice, just a (possibly wrong) outline to the best of my knowledge that might help and some opinionated commentary, best to phone up and check etc..

 

[dlockers]

I have an identical ESPP scheme. Not able to read so much text above as it is simply market price on the day of purchase less discount, and HMRC tax you on the discount as if it was a benefit. Most ESPP schemes are sophisticated enough to sell fractional shares to cover the tax liability so you don't end up picking up less that month. CGT only then kicks in as normal, you can hold the shares for as long as you want.

 

[wildest_jjk]

(disclaimer, not a lawyer or accountant)

No, because it doesn't seem to be an approved scheme the gain (if applicable) is essentially from the market value on the day he makes the purchase, income tax and NI is due on the difference between the price he pays (the exercise price) and the market value, not CGT. so any CGT is only applicable beyond the amount on which he pays income and NI on - ergo exercising and selling immediately or shortly after should basically result in no or tiny GCT.



(disclaimer, not a lawyer or accountant)

So it sounds like a share option scheme that isn't in an HMRC-approved scheme. You mention being able to buy at a discounted price - I presume you're referring to a price that is set in advance and on a particular date? i.e. if you opt into this thing you're granted an option (the obligation to buy bit is a bit funny mind - so I am a bit unsure here)

The below is written under the assumption we're talking about some employee share option scheme.

This isn't advice but AFAIK, the basics of how options are taxed in the UK are:

Ordinary investor:

You purchase options on an exchange (paying the premium for them), if you sell the options then you make a gain or loss for CGT purposes (or indeed if they expire worthless) as these things have value themselves (the premium). If you exercise the options then the cost of the resulting shares are bundled together with the option premium for GCT purposes and there is no gain or loss until you sell the shares.

Employee in an HMRC approved scheme, for example, save as you earn scheme:

You're granted options by your employer, any notional premium is ignored even though you've just "earned" a thing of value, if they expire worthless then there is no GCT loss. You save in some savings account until expiry of the options (minor tax break on the interest here, realistically rates are low so meh). Upon expiry, you can choose to exercise the options if profitable to do so (using the savings from the special savings account), your cost for GCT purposes is based on the strike price/cost of the shares (similar to how an ordinary investor is treated), so you're (potentially) liable for GCT for the difference between that and the price you(eventually) sell at. (can be avoided by dumping into an ISA or pension). They like to say that you're getting to avoid income tax and NI via these schemes but you're (potentially) liable instead for CGT and they're basically treating you similarly to an ordinary investor (albeit ignoring any value/premium for the options you were granted).

Employee not in an HMRC approved scheme.

(This is the one that annoys me a bit in how they treat it and what I think you're referring to).

You're granted options by your employer, any notional premium for these options is ignored (as per above re: the approved schemes too). Upon expiry, you buy the shares (apparently you're forced to under your particular scheme, an option is generally the right but not the obligation to buy an underlying asset, but meh)
Apparently this is because of the risk of tax avoidance schemes but how HMRC now treats you is rather ****ty (IMHO). You're liable for income tax and NI (not CGT!!!)on the difference between the exercise price and the value of the shares at expiry - this is naff because if you want to hold onto the shares then, unlike an ordinary investor, your tax liability (which would otherwise be CGT) isn't deferred until the sale of the shares but is charged on an (as of yet) unrealised gain(!!!), you owe income tax and NI which must be paid via self-assessment that year even if you wish to hold onto the shares (this might strongly incentivise employees to sell in order to pay that tax bill).

Your cost for CGT purposes, unlike in the HMRC approved schemes or in the case for an ordinary investor, is not the exercise price (+ premium, if applicable) but rather the value of the shares at expiry (so you're liable for CGT beyond the amount which you owe income and NI on). If you do keep them then you have a potential gain or loss for CGT purposes from that point onwards - so in theory you could later make a loss having already been taxed (income and NI) on an unrealsied gain. IMO this is unfair but meh...

disclaimer - not a lawyer/accountant The above is not advice, just a (possibly wrong) outline to the best of my knowledge that might help and some opinionated commentary, best to phone up and check etc..

Yep that's exactly right dowie. So it sounds as though it is not HMRC approved which I guess would make sense given some of the more unusual elements to it.

This is exactly why I was trying to avoid even having to consider CGT reporting by selling immediately. The problem is the way I understand it if the disposal proceeds over the year are four times the annual allowance you have to report regardless. I guess I'll have to check on this as you would think paying income tax/NI would be enough!

 

[wildest_jjk]

I have an identical ESPP scheme. Not able to read so much text above as it is simply market price on the day of purchase less discount, and HMRC tax you on the discount as if it was a benefit. Most ESPP schemes are sophisticated enough to sell fractional shares to cover the tax liability so you don't end up picking up less that month. CGT only then kicks in as normal, you can hold the shares for as long as you want.

Yep agreed. From talking with friends I think it depends on the company though as in come cases the discounted purchase price could be based on the market price at the start or end of the plan. The tax can also be paid out of PAYE without selling shares to cover this.

 

[dowie]

Yep agreed. From talking with friends I think it depends on the company though as in come cases the discounted purchase price could be based on the market price at the start or end of the plan. The tax can also be paid out of PAYE without selling shares to cover this.

Ah OK so we're not exactly talking about a regular share options scheme here - normally that involves the strike price (the price at which you have the right to buy the shares at expiry) being known and fixed when the option is granted. (based on the market price or some discount of it at the time the options are granted).

You seem to have some sort of share purchase plan with some optionality built-in albeit where the strike price is variable and possibly based on the market price at the end of the scheme according to what you're saying there at least (FWIW you can get options with variable strike prices, for example, lookback options where the strike might be some floating value equal to the min price in some given period looking backwards say).

That would still suggest the tax treatment would be the same as with any unapproved share options scheme regardless, i.e. income and NI liability when you purchase the shares, then (potential) CGT from that point onwards if you keep the shares.

Similarly, if you were to have a grant of RSUs (so no purchase necessary) then you're basically getting options with a strike price of zero and so they're treated like a share option scheme outside of an HMRC approved scheme too i.e. income & NI are applicable at the time they vest.

 

[EdGey]

Thoughts on Visa current price? Bouncing back any time soon or expected to remain slow?

 

[delta0]

I have an identical ESPP scheme. Not able to read so much text above as it is simply market price on the day of purchase less discount, and HMRC tax you on the discount as if it was a benefit. Most ESPP schemes are sophisticated enough to sell fractional shares to cover the tax liability so you don't end up picking up less that month. CGT only then kicks in as normal, you can hold the shares for as long as you want.

Same. I get a fixed price for 2 years (share price at the start of the period - 15%) which only resets to a lower price if the share price falls in that period. The difference in price between that fixed price and the current share price at purchase i my case is taxed through income rather than share sell off and any gains after that would only be eligible for CGT once they surpass the CGT allowance. My RSUs on the other hand do sell off a proportion of themselves when they vest to pay the tax bill.

 

[jsmoke]

How does selling your shares work?

Say you bought £2000 worth of stock/shares and leveraged this also by 10x so that's £20000 worth of stock. Now the graph goes up and you decide to sell(or I think, try to sell). Now I assume your not guaranteed to sell, there needs to be other buyers with an order in to buy at the same price your selling at, or thereabouts?

If this is correct what happens if there are not enough buy orders in for all your shares your trying to sell?

 

[Diddums]

lol

 

[dowie]

If this is correct what happens if there are not enough buy orders in for all your shares your trying to sell?

Depends on the type of order you submitted. If a (sell) limit order then it's only filled at that price or better (i.e. higher) ergo your order would be partially filled if there aren't sufficient buy orders to fill it and the rest would sit in the order book waiting to be filled at that price. If the market subsequently drops away from that level then you didn't get to sell as many shares as you hoped to.

If a market order then it will just take everything at the current bid, and will take out buy orders at the next level down, and (potentially) so on until it gets filled.

 

[jsmoke]

lol

Why lol?

 

[dlockers]

How does selling your shares work?

Say you bought £2000 worth of stock/shares and leveraged this also by 10x so that's £20000 worth of stock. Now the graph goes up and you decide to sell(or I think, try to sell). Now I assume your not guaranteed to sell, there needs to be other buyers with an order in to buy at the same price your selling at, or thereabouts?

If this is correct what happens if there are not enough buy orders in for all your shares your trying to sell?

Please don't mess with leverage.

 

[Jokester]

What's happening today? World markets seem to be taking a big hit.

 

[dwarf]

What's happening today? World markets seem to be taking a big hit.

Economic data is indicating that the recovery of major economies is slowing and the Federal Reserve in US has agreed to slow the pace of bond purchases later this year. Also the latest research on covid indicates that people infected with the delta variant that have been double vaccinated are just as infectious as those who have not been vaccinated. There's a load of other factors too. More here.

 

[ltron]

The markets are looking very weak, but I'm surprised Afghanistan is even a factor. We've known that it's been a disaster for a very long time, recent events merely confirm that.

 

[ltron]

Economic data is indicating that the recovery of major economies is slowing and the Federal Reserve in US has agreed to slow the pace of bond purchases later this year. Also the latest research on covid indicates that people infected with the delta variant that have been double vaccinated are just as infectious as those who have not been vaccinated. There's a load of other factors too. More here.

Surely if the virus becomes a big problem again and the recovery is slowing then they will have to reconsider the tapering decision?

 

[englishpremier]

Surely if the virus becomes a big problem again and the recovery is slowing then they will have to reconsider the tapering decision?

Recovery slowing doesn't really mean anything given that something recovering to a previous figure is always going to slow as it gets closer.

It's like when the markets crap the bed when they see that China's economy only grew single figures instead of double figures, completely ignoring the fact that it can't realistically grow by double figures every year, especially as it becomes more developed.

 

[silversurfer]

The markets are looking very weak, but I'm surprised Afghanistan is even a factor. We've known that it's been a disaster for a very long time, recent events merely confirm that.

Afghan wont be the first country we deal with where the common people lack any proper process of citizenship. Its likely a net positive for the situation to resolve especially if they setup mining instead of the prior mass drug exports. They've had mass deposits established a decade with nothing done afaik

"We spent $2.26 trillion over 20 years in Afghanistan which has a population of 37.5 million which is $60,267 per capita. Afghan per capita GDP is about $500 by exchange rates and $2,000 by PPP (purchasing power parity). If we use the higher latter number, we could have provided 30 years worth of income for every single person living in Afghanistan instead of 20 years of war, or more than doubled living standards by 150% for 20 years. Another perspective, at 4 persons per family, we could have built each family in Afghanistan a $241,000 manson (a new apt in Kabul costs say $25k).

This is an interesting situation between old and new star finance players, neither wrong in their own way.

 

[Minusorange]

https://www.bbc.co.uk/news/entertainment-arts-58270577

UK cinema box office takings in the month since all Covid restrictions were lifted in England were half of their pre-pandemic level.

Box office tracker Comscore said £65.7m was spent on seeing films like Black Widow and Fast & Furious 9 in the four weeks after "freedom day" on 19 July.

The figure for the corresponding weeks in 2019 was £129m.

Cinemas said they were "very pleased" with the figures and "pretty confident" they will get back to previous levels.

It's a similar picture in the US, where takings for the last four weekends have been 51% of the equivalent 2019 figures.

Looks like the Cinema chains are in for a rough time

Good news with Morrison's though as they've gotten an even higher bid it seems

 

[Huggie86]

Its hard to know whats for the best sometimes. I've got £20k in a S&S ISA and £15k in an assortment of shares. With about £15k in cash, was wanting to put more in today and yesterday with it being a down few days. But in the back of my mind I'm worried about an upcoming crash. I know you shouldn't listen to 'youtube' investors but there is a lot of negativity going around recently.