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This year I will have to compile my first tax return. I have received the equivalent of 5,000 GBP in restricted stock of the Company I work for. I have already sold these shares and I know that I have to put this 5,000 GBP in my tax return but I have no idea how this has to be done and cannot find clear example on HMRC website. Do you have any document that can clarify to me how the tax return has to be filled in case an employee receive a bonus in terms of equity?

Just to give some more details:

I have been granted a number of restricted shares of the company I work for over the past few years and these have become vested and I was able to sell these stocks for an amount of about 5,000 GBP. The account where those shares have been credited has given me the opportunity to pay tax by using part of the shares. In particular, the responsible for the payroll in my company has told me that they withhold a marginal tax rate of 47%. So what I was able to send to my personal bank account after those shares have been sold, was the net after the 47% was retained. My total income is slightly above 100,000 GBP so I pay 40% marginal tax (plus 2% national insurance), but I also get a reduction of the non-taxable amount given I am above 100,000. Anyway, the payslip that I received after the selling of my shares showed some adjustment that I guess was processed by my company to refund me for the taxes I overpaid given they withhold 47%. It looks like I have paid the taxes on my shares bonus but I am pretty sure I still have to report this to HMRC in this year tax return. Hence the question.

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  • Did you receive them in the tax year you're compiling a return for? Can you check your payslips for the time you received them to check if their value was put through your payslip?
    – Ganesh Sittampalam ♦
    Commented Aug 1, 2018 at 22:27
  • Yes, I received them in the tax year 2017/18. The value was in my payslip after they vested.
    – opt
    Commented Aug 1, 2018 at 22:53
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    What sort of employee share scheme is this - this is vital as tax owed varies a lot
    – Neuromancer
    Commented Aug 2, 2018 at 22:27
  • I added few more details. It is an employee stock plan under which I am granted a number of shares that then become vested after few years.
    – opt
    Commented Aug 11, 2018 at 18:23

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There are two kinds of tax employee share awards might be subject to.

Firstly you might owe normal income tax (and also national insurance), unless the scheme is HMRC approved which would require it to fall under certain limits and sometimes have minimum holding periods. It's quite common for schemes not to be approved.

Income tax is based on the value of the shares when they vest/become unconditionally available to you. If you are liable to income tax, then your company will probably have put the value of the shares through PAYE and perhaps sold some of them immediately to pay the income tax - you should either see more income and more tax paid than normal in the pay period in question or perhaps an extra payslip just for the share delivery.

Assuming that's the case, there's nothing special you need to do for income tax when filling in your tax return: the total value of the shares will be included in your year-end P60, you'll already have paid roughly the right amount of tax, and any adjustments will be calculated on your tax return when you copy the values from the P60 into your tax return.

Secondly, there's capital gains tax. However, that only applies on any change in the value of the shares between the time you received them and the time you sell them, as the actual initial value of the shares has already been taxed as income. There's also an annual allowance that's £11,300 for the 2017-18 tax year.

So unless you have any other capital gains, you won't have any extra tax to pay as any gain would be tiny compared to the allowance. You don't even have to fill anything in on your tax return unless your gains exceed the allowance or you disposed of assets worth more than £45,200.

So in summary, double-check that the shares were taxed through PAYE when you received them, but otherwise it's unlikely you need to do anything special when filling in your tax return.

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  • This all depends on if its and HMRC approved scheme you don't pay tax in most circumstances this is a dangerous answer as we don't know what sort a scheme the OP is in.
    – Neuromancer
    Commented Aug 2, 2018 at 22:25
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    That's a fair point, though I don't agree my answer is dangerous, as if it was HMRC approved then there wouldn't have been any PAYE taken in the first place.
    – Ganesh Sittampalam ♦
    Commented Aug 2, 2018 at 22:28
  • Thanks a lot. I added few more details. Once shares vested, my company indeed used part of the shares to pay for 47% tax. When I received the net amount of shares, I immediately sold them so I guess capital gain was close to zero. But the month after the selling, I received a "stock adjustment" in my payslip which I guess was to adjust the tax rate. I paid 47% but my marginal is 40% (+2% of national insurance) and also get a reduction to tax-free amount given total income is above 100,000. I am not sure if the company accounted for this last aspect, they might have only considered 42% tax.
    – opt
    Commented Aug 11, 2018 at 18:29
  • @opt the gross cost of the shares, and the tax withheld, should both be included in your P60. If so, when you fill in your tax return normally, all the details will work themselves out. You'll end up owing a bit more tax because of the reduction in your tax-free amount (in the range where the allowance is reduced, your actual marginal tax rate is 60%), but that'll be calculated properly as part of your tax return.
    – Ganesh Sittampalam ♦
    Commented May 6, 2019 at 17:54

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