Selling shares after 3 years

[cloherty1976]

Am I right in thinking if you sell these shares after 3 years they go in to your wages and you would pay tax accordingly. So can you put them into your avc so to avoid the tax being taken from them?

[RobertT]

Am I right in thinking if you sell these shares after 3 years they go in to your wages and you would pay tax accordingly. So can you put them into your avc so to avoid the tax being taken from them?

I've tried to look into this and I think under 'general' SIP guidelines transferring your shares into a pension arrangement or an ISA is allowed at the end of the 5 year term or if you leave employment on 'good terms'. But each employer can, to a certain extent, decide on its own rules within those 'general' guidelines so ultimately it will be up to RM if we are allowed to do that and also whether the AVC, pension or ISA provider will except the transfer.

An example of where RM rules differ from general SIP rules would be that RM are only giving us the opportunity have dividends paid out as cash, while general rules say that reinvesting them into more shares is an option.

I hope that helps.

[cloherty1976]

Thanks for that will look into it in a few years time.

[fishtank]

Am I right in thinking if you sell these shares after 3 years they go in to your wages and you would pay tax accordingly. So can you put them into your avc so to avoid the tax being taken from them?

If you take them out in years 1-3 you pay income tax on the market value at the point you take them out although if you leave for any of the "good reasons" you don't pay tax or NI and if you leave for any other reason you forfeit the shares so it isn't really applicable.

If you take them out for any reason in years 3-5 even to put them in an AVC you will pay income tax and NI on the lower of the market value of the shares at the time you:acquired them, or took them out of the plan.

[nataddick]

Some useful information that helps to answer the question is provided on pages 15 & 23 of The Guide to the Royal Mail Employee Share Offers etc

The Income tax & NI treatment of the SIP shares is totally separate from the AVC. They should be considered as 2 independent transactions. You may choose to invest the SIP proceeds in an AVC or may not.

There is nothing to stop you receving the payment via PAYE and then investing it in an AVC either as a lump sum or through monthly payments. Whether the AVC is with Royal Mail will depend on whether you remain eligible.

If you were to end up paying income tax & NI on your shares then it is possible to invest the proceeds in an AVC and render the income tax position as neutral. This is because you would receive income tax relief on the payment into an AVC. I did exactly the same thing with one of my own pensions. I took the pension at age 50 - banked the tax free cash and now pay the pension I receive (paid net of income tax) back into an AVC with RM. This way I get tax relief on my AVC contribution and it means my net payment is grossed back up. I also got my hands on the tax free cash and invested it.

I will, of course, end up paying income tax on the pension when it is paid but part of the pension will be commuted as tax free cash. The decision to invest in an AVC is for you to make.

[cloherty1976]

Thanks for that nataddick that is what I was hoping and thought there was a way of avoiding paying the tax

[Peter111]

Am I right in thinking if you sell these shares after 3 years they go in to your wages and you would pay tax accordingly. So can you put them into your avc so to avoid the tax being taken from them?

[hantsman]

Am I right in thinking if you sell these shares after 3 years they go in to your wages and you would pay tax accordingly. So can you put them into your avc so to avoid the tax being taken from them?

No
No
Not applicable