Investment & Investing

It seems obvious but it’s only worth it if you have something special going on re. Pension and Life Insurance.

Meaning?

It’s likely that you’d get more value from contributing the same amount to a pension despite the LISA’s automatic 20% return - unless there is something special in your circumstances that makes pension contributions less attractive.

Tl;dr is do not assume that just because you get a 20% bump on it that it’s the best thing going.

Sure, my perspective is;
I don’t earn very much. Not sure my pension options are great as a result.
It’s accessible (even if at forfeiture)
For our circumstance it’s a small part of our bigger savings pot and not directly from my income.

We’ve found ourselves for the moment, living well within our means. I don’t think we are too bothered about moving. I do feel we could do more to maximise our current position but don’t exactly know what that looks like.

Can anyone recommend an IFA please? One you've used? Ta

If you dont mind them being in edinburgh - and communicating online - i can recommend someone.

Well that's even better I'm in Edinburgh too!

So I’m a contractor for a new US startup, as part of my payment we are awarded stock option grants on top of my monthly pay. There was an initial vesting period which has now past, and new options vest monthly.

Before hand I did a bit of reading about how these work, and the fact that I can choose to exercise them, but I have no clue about timings and when the right time to do that would be. For example is it best to hold off exercising them until it’s clearer that the company is going to succeed? Anyone been through a similar process and have any insight?

Those shares should have a pre-set price so you can make a call on whether you think that makes sense.
I’d imagine if you are a contractor and the company is US that they have not set the scheme up to be the most tax efficient for UK employees. I’d find out about this first.

Assuming it’s not tax efficient you will pay income tax on exercising and cap gains on disposal (I think)

Not an answer to your question,but something you might consider in any case:

So I’m a contractor for a new US startup

Arguably, you aren't, because of the monthly pay and option grant.

This impacts what NI and income tax you pay, how you pay tax on any option exercises, and how the startup pays NI.

(I may be making some completely incorrect assumptions, of course.)

Some other things to consider:

• Are they public? In other words, if you wanted to exercise the options and sell some shares are you able to do so (within the enforced trading windows that may also apply)? Companies that haven't IPO'd may only offer occasional internal options sales at periodic times and with other restrictions that mean you can't pick and choose when to do so.
  
• Tax is tricky. If you have an option at price A given to you when the company had a fair market value (FMV) of B per share, then you exercise at C and a bit later sell for D. There are different areas of tax (Capital Gains, Income Tax) that apply on the differences between B and C, and C and D. The capital gains aspect is also time limited.
  
• Because of the above it is sometimes advantageous (also depends on the types of options) to exercise the options early and then hold on to the shares to dispose of at a later date. However, this requires planning, funds to exercise the options and then luck that the shares don't fall between exercise and sale, and a bit of bottle.
  
• NI is also tricky. Even more considerations here. I remember quoting "Mansworth vs Jelley" at HMRC for share options at previous employer...
  
• 99% of the time share options are a case of making sure you've got a W8-BEN on file with whichever company (eTrade, Morgan Stanley, Carta, etc) is holding the options (so they don't withhold US tax upon exercise/sale), and then exercising and selling in one go (so you don't have to front the funds to exercise) and then deal with any residual tax nonsense yourself rather than splashing the moneygun.gif and then finding you have a large tax bill you don't have the funds for.
  
• Pay attention to vesting schedules and options expiries, especially if the company isn't public.
  

Urgh, feel like I need to understand this stuff better.

The private co. that work for started this long term incentive plan with share options and vesting schedules.... it feels so complex and un-user friendly that I've just tuned out a bit but I suspect you need to keep an eye on it and do things from time to time to get the best / anything out of it.

We used to get a cash bonus which was much easier to process and accept the taxation on it....they killed that just as inflation hit 10%....

Okay so to add a bit more detail to this, the company that I own is contracted by them, rather than me personally. However, the options that we have been awarded, are to both my business partner and I personally (due to some funny business where our company was not legible to accept them).

Thanks for the detailed response. All quite complicated eh haha

So the company is not public, so far there has been no opportunities to sell shares and not sure there will be for a while. The company is still in the early days.

Tax sounds like it’s gunna be a pain so good to be aware of it. Thankful I have some good account so they should be able to walk me through things tax related when it’s needed.

Nice should on checking if I can file a W8-BEN, the options are on Carta.

Yep there is a pre set price on the options. Definitely the case that it won’t be setup in the most tax efficient way for us unfortunately. Guess it is what it is!

From what I read online there’ll be income and cap gains to pay, makes a case for exercising them early

Going round in circles with google. I have a Vanguard sipp and I’m going to change from a target retirement fund (still at 80/20) to VWRL.

I assume I should actually get the VWRB accumulating version, or is there a downside to this? I keep a small amount of cash to cover fees.

VWRP You mean?
But yes, just get the accumulation version

You should be taking to a proper accountant then, and not taking advice from here. Funny business usually leads to additional taxation, penalties and interest. For you, your company, and the client.

VHVG might be worth a look too (developed world equity only) as the fees are 0.12% and 9% better return over last 5years

A £25 PB win!

Interesting. I already took the plunge and transferred my whole pension (time in not timing etc) but will look at that for the considerably smaller isa.

Same here, and MiniGB got £50.

£25 from the PB, went for lunch to celebrate.

Cost me £70

Bank accounts that will recognise what a shop is and make a nice graph/table of total expenses for each category automatically?

I want to track our spending a bit better.

Edit: I'm in Spain so need be something 'global'.

Barclays / Barclaycard have some of this functionality.

Another way is to download a csv file and mess about in a spreadsheet; this allows you to make your own categories and correct the bank's built in assumptions.