Share Incentives

What are Share Incentives?

Introduced in 2000 Share Incentive Plans or SIPs are a means of encouraging employees at all levels to acquire shares in the company that they work for. SIPs must be open to all full time employees who are subject to UK tax on employment income.

If kept for 5 years SIPS are not subject to Income Tax and National insurance and exempt from Capital Gains Tax not paid until sold.

There are 4 ways to provide shares under SIPS:

  • Free shares – employers give up to £3,600 of free shares in any tax give year
  • Partnership shares – Employees buy shares from their salary before tax deductions at a limit of £1,800 or 10% of your income for the tax year, whichever is lowest.
  • Matching shares – Employers give up to 2 free matching shares for each partnership share you buy.
  • Dividend shares

Further Share Incentive Options

  • Save as you earn (SAYE), shares are given as part of an employee’s salary or benefits package, whereby over time employees become owners of stock.
  • Enterprise Management Incentives (EMIs) shares of up to£250,000 can be bought by the employee without paying Income Tax or National Insurance on the difference between what you pay for the shares and what they’re actually worth.
  • Company share options plan, discretionary share offered to company executives. A company can grant tax advantaged options to its employee subject to a maximum value of £30,000.

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