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.
Your employer can give you a limited amount of free shares within any tax year.
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.
Your employer can give you up to two matching shares for each partnership share you buy.
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.