Many companies offer workplace investing schemes on top of a workplace pension. The main two are Save As You Earn (SAYE) schemes and Share Incentive Plans (SIPs), which allow you to acquire or build up shares in your employer.
SAYE is a monthly saving scheme that offers a tax-free bonus on savings at the end of the term (usually 3 or 5 years) and an option to buy shares in your company with the cash. A SIP, meanwhile, is a tax-efficient way to buy or receive shares in the company you work for. You don’t pay tax or national insurance contributions on the shares you acquire, although you may have to if you leave before the end of the term. There’re more details on how various SAYE and SIP schemes work on the Money Advice Service website here.
If you acquire shares through a SAYE scheme or SIP there are special rules allowing you to transfer eligible shares into an ISA. This little-known technique could help you utilise your ISA allowance and, in some cases, save capital gains tax (CGT). Please note tax rules can depend on individual circumstances and are subject to change.
What are the rules?
Shares from a SAYE or SIP to the value of your allowance (£20,000 for 2019/20 tax year) can be transferred straight into a Stock and Shares ISA. The shares are not subject to CGT on transfer nor on eventual sale, and there is no need for the shares to be sold and repurchased as would normally be the case for moving shares into an ISA – known as a ‘Bed and ISA’.
You must have enough ISA allowance available for the tax year in which you transfer the shares as they count towards the annual ISA limit – they aren’t in addition. The valuation of the shares is calculated at the time the transfer is made, so you don’t know in advance exactly how much of your allowance the transfer will use up. If you use up all your allowance this way you can keep the balance of shares outside an ISA.
To qualify, shares must be transferred within 90 days of maturity from an HMRC approved Schedule 3 SAYE scheme or Schedule 2 SIP. They must also be eligible to be held in an ISA. Essentially, that means being quoted on the London Stock Exchange including AIM.
What happens when your scheme matures?
When your SAYE or SIP is approaching maturity, you will be notified by your scheme provider and given various options. In the case of SAYE, you will have the option to buy shares at a certain price, and within a certain timeframe, or take cash. In this instance, you should compare the market price of shares to the option price; if the option price stays below the share price there is no incentive to exercise the option.
If you exercise your option and receive shares (or otherwise acquire shares through the scheme maturity), there will be an opportunity to either receive a share certificate or receive shares electronically in a nominee account with the registrar – or both. Either way, you have 90 days to transfer shares directly into an ISA.
How to transfer SAYE shares into an ISA with Charles Stanley Direct
The method for transferring shares into an ISA depends on whether you opt to receive a share certificate or hold the shares in a nominee account with the scheme administrator/registrar. We can send you full instructions for both methods on request – just send us a secure message from your account, ideally including a scanned copy of recent statement or ‘letter of appropriation’ received from the scheme to help us assist you.
It is worth noting, however, that when transferring a share certificate there is a £50 administration fee for ‘dematerialising’– i.e. turning a paper shareholding into an electronic one – whereas there is no administration charge for a transfer from a nominee account.
With either method, if there are excess shares over the remaining ISA allowance, the balance of shares is retained in your Charles Stanley Direct Investment Account. Once the shares are in the ISA your account will be updated and you will be able to view or trade them.
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