An Incentive Stock Option gives an employee the right to buy stock shares at a discounted price. If your employer offers you company shares, you could get tax advantages. An example is not paying Income Tax or National Insurance on the shares’ value. This is because these incentive stock options are not seen as ordinary income in the eyes of HMRC.
If you decide to set up an investment portfolio, you can end up paying the following taxes:
Buying shares through an Incentive Stock Option is a much better deal compared to regular shares or share options. This is because you’ll only be subject to CGT when you decide to sell your shares for a profit.
If you earn dividends of more than £1000 per year, you’ll need to pay dividend tax on them, and if you sell the shares for a profit, you may need to pay Capital Gains Tax.
Remember to file your Self Assessment by 31st January the year after the tax year you’re paying for. For example, if you’re paying your 2023/2024 tax return, this should be paid by 31st January 2025.