Shocked at Tax and NI liability on shares after leaving RM

[fb1969]

Trying to put some past experience in from my previous job that dealt with pay, plus the tax and NI that I paid on redundancy money.

First up, page 10 of the guide linked to above does state "Partnership Shares. You can sell your Partnership Shares from the SIP at any time. But, if you sell them within three years of purchase, you will have to pay income tax and NICs on the value of the shares on the date they are sold." So in that respect it is right, but to be honest I doubt many people would have read the guide in full.

With the money taken for tax and NI it may be similar to what happened to me. I left the job around 10 years ago and it was shortly after HMRC had decided to see any money paid as what they felt was "pay" as what you would get every week/month for rest of the tax year. So I'm wondering if it is possible that the £8100 has been seen as a regular payment for the rest of the tax year and they have multiplied it up to March 2022.

That is what happened to me. Part of my Redundancy money was tax free, but the remaining bit was multiplied by the number of months remaining in the tax year and I paid tax and NI based on that. They had assumed that the £3000 I received would be paid monthly for the remaining six months of the tax year. As it was, I didn't earn anything else before the end of it so eventually I received the overpayment back.

Hope that makes some sense!

[freespeech]

Thanks for the further replies, no worries no offence taken buy any ''harshness''.

In my defence Robert I don't think even you with your excellent financial knowledge were aware that the tax liability is based on the value of the shares when you leave rather than a reflection of the tax I ''avoided'' paying when purchasing them.

As Woodie says, I agree it's just a stealth form of cgt.. and one that wouldn't have applied if I'd just bought the shares outside of any employee scheme.

There's still the matter of how they calculate that 20 percent of my £5,800 worth of conditional shares somehow comes to £2,100!

If you have "earn't" £5800 in one pay period you will be assumed to be paying 40% tax. If you aren't working you should get the additional tax back (assuming prior earnings and this are less than the 40% threshold).

[wacko74]

Thank you for the further replies, yes possibly they are assuming I am sill earning for this tax year, which I'm not, will any potential rebate likely be automatic or will I have to chase HMRC up?

[RobertT]

Refunds should be automatic but can take quite a while, possibly not until the start of the next tax year?

So getting in touch with HMRC should mean getting any refund you're due, earlier.

[Alexei]

As been said, you're likely being over-taxed through HMRC accidentally inflating your earnings, or you're on an emergency tax code. Either way, HMRC are the people to contact. I think their options are receive a cheque, or an alteration of your tax code which effectively reduces the tax you pay in your wage to receive the money back over the course of the financial year. A friend has just went through the exact same thing, albeit not with P&M shares but the principle is the same.

The scheme looked good on the surface, but to get any real value you had to hold for five years from the date of when the matching shares were gifted.

[TopperGas]

I had similar issues/concerns when I left my previous employers and was forced to sell my shares in the company's SIP.

Assuming you had officially left the Royal Mail and already received your final pay and P45 then the Income Tax/NI was most likely calculated using the "OT" method (search Google and you should find a full explanation from the HMRC) basically any shares sold upto a value of £3125 are taxed at 20% and anything over that figure is taxed at 40%. With NI calculated on the following basis:

0 to £166.00 would be taxed at 0%
£166.01 to £962.00 would be taxed 12%
£962.01 + would be taxed at 2%.

At some point the HMRC should do their own calculations and, then, if appropriate, refund any over payments which have been deducted by the Royal Mail, I believe that is usually done this month for most PAYE payers.