Tax-efficient share option schemes

There are four main share ownership/option plans that offer tax and NIC advantages for employers and employees. Share Incentive Plans, Save As You Earn and Company Share Option Plans are subject to HMRC approval, Enterprise Management Incentives are not.

Share Incentive Plans (SIPs) – can provide tax and NIC advantages for employees and company directors to encourage them to hold shares in the company or group for which they work. Companies can give up to £3,600 worth of free shares in each and any tax year to each employee.

The plan must be open to all employees to qualify. Employees can also buy ‘partnership shares’ up to £1,800 or up to 10% of their income for the tax year, whichever is the lower.

Companies can match and reward employees’ commitment by giving up to two matching shares for each partnership share an employee buys. For employees, the share awards are tax and NIC free if kept in the plan for five years, and there is no capital gains tax on any growth in the value of the shares. Employers are not liable for employers’ NICs on the shares they provide – see for details.

Save As You Earn (SAYE) – a savings-related scheme enabling employees to save up to £500 per month to buy shares with the savings for a fixed price.

Any bonus or interest received on savings at the end of a scheme is tax- free, and no income tax or NICs are paid on the difference between what is paid for the shares and what they are worth, although shareholders may have to pay Capital Gains Tax when they sell the shares. See for further details.

Company Share Option Plans (CSOPs) – allows employees the right or option to buy up to £30,000 worth of shares at a price fixed with no income tax or NICs payable on the difference between what you pay for the shares and what they’re actually worth.

Enterprise Management Incentives (EMIs) – tax advantaged share options designed to help small, higher risk companies to recruit and retain staff with the skills to help them grow and succeed. EMIs allow independent trading companies with gross assets up to £30 million to provide options on shares worth up to £250,000 per employee without paying income tax or NICs on the difference between what you pay for the shares and what they’re worth.