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bigduckontax, Accountant
Category: Tax
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I recently bought stock options that I was given by my

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Hello I recently bought stock options that I was given by my employer. I'm looking to understand if I have to pay income tax on the "spread" and if yes, I'd need advice on how to declare and pay the required tax.
JA: For which tax year do you need advice?
Customer: I exercised last year. So probably I'd need advice for the last and the current year.
JA: Anything else you want the Accountant to know before I connect you?
Customer: no

Hello, I am one of the experts on Just Answer and pleased to be able to help you with your question.

Is this Share Scheme HMRC approved?

Customer: replied 12 days ago.
I'm 90% sure it's not HMRC approved. Is there a way to check and confirm that? Note that my employer is US-based but I'm working in its UK branch.

The only way to check is with your employer. I have known of schemes run by US employers which were approved.

If it is approved there is no tax charge on vesting. If it is not then there will be an Income Tax (IT) charge on the difference between the vesting price and the current market price.

On sale the rules are the same. There will be a Capital Gains Tax (CGT) charge levied on any gain made. This will be at 10% or 20% or a combination of the two rates depending on your income including the gain in the tax year of disposal. You have a non cumulative Annual Exempt Amount (AEA), currently 12.3K, to offset any gain.

Customer: replied 12 days ago.
Thanks for the explanation. Understood, that's clear. And then, if it's not approved (most likely), what would I need to do to declare and pay the Income Tax on the spread? (the difference between the exercise price and the current market price)?

Correct, you would do that on your annual self assessment tax return.

Customer: replied 12 days ago.
I see. I missed doing that at the end of the previous tax year (when I exercised). Can I submit a self-assessment tax return for the previous tax year? Alternatively, can I report it in the current year's self-assessment?

You could always write to HMRC to amend your return, but the gain would have to exceed the AEA to need to be reported at all.

Customer: replied 12 days ago.
Only the gain would have to exceed the AEA or the gain PLUS salary (total income) for that year? Also, would the HMRC
Customer: replied 12 days ago.
Also, does the HMRC give fines in those cases, when amending returns?

Not usually, after all everybody makes errors from time to time including HMRC! Only if the gain exceeded the AEA would it have o be declared.

Customer: replied 12 days ago.
I see. I think I got all the info I needed for now. Thanks a lot for your help.

Delighted to have been of assistance.

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