If you're a limited company director then the topic of issuing new shares is likely to arise at some point in your business journey. In this video we'll be covering the basics of issuing new shares including the top 4 reasons why you might want to do this as well as the process of share issuance.

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⏱ Time Stamps:
0:39 The top 4 reasons to issue new shares in your limited company
2:06 What exactly is the issuance of new shares?
3:43 The taxes you need to consider when issuing new shares.

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The top 4 reasons to issue new shares for your limited company include:

★ You want to issue shares as an incentive to a new business partner who will bring crucial skills or assets to the business to help it grow.
★ You want to issue shares to a spouse, family member or friend.
★ You want to issue new shares to private or angel investors, in return for a monetary investment.
★ You may want to issue new shares as part of a share option scheme to employees to incentivise and reward them.

A share in your company is essentially a piece of it, if you have 100 shares then each one represents 1% of your company. When issuing new shares you are essentially creating more pieces of the company, so for example if you issued 100 more shares, each of the 200 shares would represent 0.5% of a company.
That's not to say that issuing more shares makes the existing ones worth less. For example, if your shares were valued at £1 and you issued more of them, these would still be valued at £1.

Issuing shares early on in your business journey is often advantageous as presumably they have a lower value, and thus, less potential for capital gains tax. As per our example, if Bill issued 50 new shares and gifted them to his son John, his son is technically gaining something of value. Let's say these shares had a value of £33,333 as per our example, this would mean that John could potentially face Capital Gains Tax on this gain, whereas if he'd been gifted the shares when the value of them was £0, Capital Gains Tax would not be an issue.

The main takeaway from this video is that the transference of shares, be it as a gift or in exchange for money, comes with many considerations. You should always seek professional advice if you're planning on issuing new shares for your limited company.

Let us know in the comments, your experiences with issuing new shares and if there are any topics you'd like to see us cover in the future.

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Our videos are for general guidance, education and empowerment in helping you understand accounting, tax and your numbers. They in no way constitute specific advice to your specific circumstances. Me & my team would be delighted to help you with your specific queries or accounting requirements through a formal engagement.

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