Lump sum and tax

[MegCleary]

The company DH works for was bought out and his share options have led to us having a lump sum turn up in our bank account!!!

It is hopefully enough to pay off our mortgage but we know we have to pay tax on it just not sure how much.

Any wise souls with knowledge on this would be appreciated.

What rate does he pay tax at normally?

How much will this make his annual earnings?

His salary is £45000 so pays high rate on some of his earnings. The lump sum was £200000.

I would consider taking some advice from a tax accountant. It might be that this is taxable under capital gains tax not income tax, so various reliefs and allowances will be allowable but it won't be possible to say how much without more information hence that's why you might need an expert.
The worse case scenario is that 40% will be payable so I wouldn't spend that amount and put it away in a high interest account until you know.

He has booked to speak to an IFA on tuesday but i thought some advice from the wisdom of mumsnet may have us forearmed in this situation. Never had to deal with this before. Don't want to mess it up.

Has income tax and NI already been deducted at source already though, ie has it gone through payroll in the same way his monthly pay does?

Did he receive a payslip at all, either as a separate payslip, or as part of his most recent 'regular' payslip?

In our bank account it just says completion monies transfer. I don't think it has gone through payroll. It happened just before christmas when he was on leave so not sure what is going on.

Nice surprise in the bank though!!

Sorry, last bit wasn't clear - has he received either an additional payslip directly relating to this share option exercise, or has the amount (the £200k) been recorded in any way on his most recent payslip that he's received from work?

What I'm trying to get at is that ideally the income tax and NI due (NOT capital gains, just income tax) would have been deducted at source by the employer, in which what you and your husband have received in the bank account would be the net amount, rather than the gross.

Suggest thinking about CGT implications (if any), once you have clarity on the income tax and NI part.

X post! I'd ask your husband to check out with payroll department whether this has gone through the payroll, and take it from there.

He;s back at work tomorrow should find out a bit more. Many thanks.

If it's income, he will need to do a tax return even if tax has been deducted at source. Over £100k and it's the law.
Don't forget 60% marginal rate from £100-£115k.

Definitely don't spend it yet!!

share options have complex tax laws depending on the scheme - make sure he has the details of the scheme. Note an IFA is rarely tax trained, so you may need to see an accountant.

as I thought this is going to be very complicated

The IFA implied he would look into the company ie how it was set up etc to find out what tax we owed. I believe there are implications as to how many employees it has perhaps as to status of shares.

Its NOT necessarily income

it could be a capital gain and therefore taxed utterly differently
and depending on what proportion of the shares he owned there are some significant tax reliefs
an IFA will not have the answers,
a tax accountant will

a capital gain on shares will not come under the remit of NI or PAYE

And make sure you move it from your regular current account. Call up your bank and get it transferred to a savings account or some such for now. You do not want to risk the lose/theft of your current account card giving some criminal a lovely surprise!

The discussions that were had before the sale implied more capital gains issue but not sure.

Almost certainly CGT rather than income, so 28% for a higher rate payer. May be less if an old approved scheme.

Rightio many thanks all

He has spoken to the finance director and its CGT 28%. We need to sort where to put some now to earn interest & pay off our mortgage. Yay.