ISAs
The bulletin explains that if you receive dividends from shares held in Individual Savings Accounts you will not have to pay tax on these.
SIPs
It also provides information about any dividends you receive on shares that you hold inside a Share Incentive Plan (SIP). Dividends from SIP shares are taxed in the normal way unless they are reinvested. There are tax advantages if your dividend income is reinvested within the SIP and Dividend Shares are acquired. Reinvested dividends are free of tax provided that the Dividend Shares acquired are held within the SIP for three years or more or taken out of the SIP due to a qualifying leaver reason.
Importantly it explains what happens if you withdraw your SIP Dividend Shares before the end of the three-year holding period due to a non-qualifying leaver reason, for example resignation. If this is applicable, all the dividends that were used to buy Dividend Shares in the preceding three years are taxed in the year the Dividend Shares are withdrawn from the SIP.
CGT
Special rules let you transfer into a stocks and shares ISA any shares that you take out from a SIP or receive when you exercise a SAYE scheme option. Transferring SAYE or SIP shares to an ISA is not chargeable under Capital Gains Tax, nor is any growth in value of your shares within the ISA. However, transfers must be made within 90 days of exercising the SAYE option or removing the shares from a SIP and are subject to the annual ISA subscription limit.
Tax reporting
The bulletin provides a useful table on ways to report dividends and capital gains and in what circumstances you can use the HMRC online reporting tool or request a change to your tax code instead of reporting through Self-Assessment.
Tax allowances
The 2024/2025 tax year has seen the annual dividend allowance reduced to £500 and the CGT Annual Exempt Amount reduced to £3,000, making this an important communication point for share plan documentation. The bulletin is a helpful summary of the key points to consider.
Delivering For You And Your Employees
We are on hand to support you and ensure the successful management of every aspect of your share plan, from launch right through to maturity.