Tax on employee shares

My girlfriend and I received employee shares from our company some years back, in 2017. I have subsequently left the company and received a promissory note for my shares (earning me 1% interest per year). My girlfriend still works there and has her employee shares. We received communication that there would be payment (for her shares and my promissory note) in the upcoming months. Based on information on HMRC website, the CGT is not payable on employee shares: https://www.gov.uk/government/publications/employee-share-and-security-schemes-and-capital-gains-tax-hs287-self-assessment-helpsheet/hs287-capital-gains-tax-and-employee-share-schemes-2021 My questions are: Do we need to declare the income we receive from the shares / promissory note to HMRC? Do we need to pay CGT (or other tax) from her shares or my promissory note - or from the interest it has earned me? Kind regards, Wojciech

Hi Wojciech,
As the promissory note is seen as a loan, please refer to:
HS296 Capital Gains Tax and Debts (2024)
Thank you. 

 

Thank you for your response. Three follow up questions: How would the promissory note / loan be taxed - given the interest would be approximately 1500 per year when it is paid to me, for around 8 years? I am a higher rate tax payer, which I understand has 500 tax free interest per year. So would it be approximately 8x(1500-500) = 8000 tax on the interest, no tax on the 'capital' from the employee shares? I also lended money to a friend approximately 5 years ago - the loan was never fully repaid, so I lost money. Am I able to offset the some of the interest gains by this irrecoverable debt? If so, are there some limits (e.g. how long ago would this need to happen so that I am still able to use it to offset current gains) and what would I need to submit to HMRC (the contract between us etc.)? How about the income from employee shares for my girlfriend? Does she need to declare it to HMRC / pay tax on it? Kind regards, Wojciech

Hi,
Most interest is now paid without deduction of tax.  
You declare the interest to HMRC whether in writing or a tax return.  
Please have a look at the guidance on helpsheet HS295: HS296 Capital Gains Tax and Debts (2024).  
Your girlfriend needs to declare her employee shares as the dividends are taxable.
Thank you.