Employee Share Scheme Tax

Employee Share Scheme Tax

Employee share schemes are becoming increasingly popular within businesses in order to engage with their workforce and recruit and retain employees. The Share Incentive Plan (SIP), also referred to as an employee share option scheme or employee share ownership scheme is a tax efficient plan for employees. There are four key aspects to the share scheme that a company can choose to use, these are: free shares, partnership shares, matching shares and dividend shares.

Free shares:

Your employer can give you a limited amount of free shares within any tax year.

Partnership shares:

This is when you can buy shares out of your salary before tax deductions, however there is a limit on how much you can spend, which is 10% of your income for the tax year.

Matching shares:

Your employer can give you up to two matching shares for each partnership share you buy.

Dividend shares:

The dividends which you gain from free, partnership or matching shares can be used to buy more shares. However, this is only possible if your company scheme allows you to do so.

These four options are decided by the company and are in accordance with their particular scheme requirements.


What benefits are there to using this scheme?

For an employee:

An employee share scheme with tax treatments can offer many benefits for employees that have shares through this scheme. For example, if you keep the shares you have through the Share Incentive Plan (SIP) for five years, you will not pay Income Tax or National Insurance on them.

Additionally, you won’t pay Capital Gains Tax on shares you sell if you keep them in the plan until you sell them.

For an employer:

An effective employee share scheme (tax), enables a company to connect with employees, allowing them to feel more integral to the company they work for. In effect, this can increase employees’ sense of security and loyalty to a company and can aid in employee retention. In addition to this, the SIP acts as an incentive to many potential employees and can, therefore, help with recruitment.


How do you apply for this Scheme?

An employer can easily apply for the employee share incentive scheme by completing the form on the All UK resident employees are eligible to take part in the employee share scheme UK, however a company may apply a qualifying period of service.

How we can help:

The experienced team at Perrigo Consultants will use their industry knowledge and expert skills to guide you through the options regarding HMRC employee share schemes. Furthermore, Perrigo Consultants are here to offer advice on a range of tax and accountancy services, including insurance against HMRC tax inquiries and investigations. Contact Perrigo Consultants on 01299 488860 for a free, no-obligation consultation with our tax advisers. Or email us with any questions or queries you may have: