I was researching the PAYE ESPP tax treatment threads today and found this. I have a question on how tax is calculated on ESPP share purchases.
I elected to purchase shares of the company I work for every month, and a fix percentage of my salary is deducted by payroll and used to purchase shares under the ESPP scheme. The shares are purchased at market value and a discount equal to 15% of the full market value is then applied.
My understanding of the taxation treatment is:
- The 15% is in effect the BIK part of this transaction;
- Tax at the appropriate current rate should be applied to this 15% every month;
My payslip indicates that ESPP BIK is retained at source, but the deduction for BIK seems much higher than the 40something% that I was expecting to be applied to the 15% discount.
Just to be clear, I am not interested in how tax works when I sell these shares, only in the BIK puchase scenario.
I am planning to send an enquiry mail to my payroll dept on Monday, but would like to have an idea of what AAMers think before sending.
Any advice greatly appreciated.