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Royal Mail tax consequences

15th October 2013

The financial sector knew that it was going to be popular, but just not quite how popular the Royal Mail privatisation share issue would be. Last week, hundreds of thousands of people became new shareholders – having a stake in an entity that has been in existence for almost 500 years. For those that were lucky enough to receive shares (the number available was over-subscribed seven times!), here is our handy guide to the tax implications and what you may have to declare to HMRC.

Income Tax

Those shiny new shares that you own will entitle you to a dividend. What you have to do will depend on how much you earn.

  1. If you are a basic rate taxpayer (i.e. earning up to £41,450 in the 2013-14 tax year), then there is nothing more that you need to do.
  2. If you are a higher rate taxpayer (i.e. between £41,450 and £159,440 for 2013-14), or an additional rate taxpayer (above £159,440), then you will need to declare the tax through a tax return.

Even if you do not need to submit the return, you should keep any documents relating to the shares in a secure place.

Stamp Duty

When you buy shares, you normally have to pay Stamp Duty (at 0.5% of the total amount), if the total amount is above £1,000. Since the Royal Mail shares are a new issue, there is no Stamp Duty payable. However, if you decide to buy the shares now, there will be Stamp Duty to pay, since they have already been issued.

Capital Gains Tax

Let’s say that you forget about the shares, and 5 years from now you find that they are worth a lot more. If you sell them, you may have to pay Capital Gains Tax on the profit you have made. Roughly, the tax-free capital gains amount each year is about £10,000. You will also need to file a tax return for the year in which you made the gain.

Inheritance Tax

To find out the consequences of giving the shares as a gift, please visit our other extensive blog on the subject. Obviously this blog is not an exhaustive analysis of the receipt of shares, and your personal circumstances may be different. We recommend that if you have any other queries about the information above, you contact a tax professional, who will be able to give you more personalised advice.