The UK has long encouraged employee ownership through Employee Share Schemes (ESS).<\/p>\n\n\n\n
These are an effective and flexible tool which allow employers to grant employees a share in the ownership of the company they work for. An added incentive is that both employer and employees can receive tax advantages through approved schemes like Share Incentive Plans (SIP) and Save As You Earn (SAYE).<\/p>\n\n\n
An employee share scheme<\/dfn> is a way for employers to share company ownership with employees as part of their remuneration package. It can be a useful tool to help employers recruit, retain and incentivise employees. For employees it can be an additional way to help them achieve their financial goals.<\/p>\n\n\n\n While there are different forms of ESS, this article will focus on these commonly used HM Revenue and Customs (HMRC) approved tax-advantaged share schemes available in the UK:<\/p>\n\n\n Whether it\u2019s a HMRC-approved scheme or another form of ESS, we\u2019re here to help An\u00a0EMI scheme<\/strong><\/a>\u00a0allows companies to offer up to \u00a3250,000 worth of shares to each employee. Ideal for small companies having assets of \u00a330 million or less (limit increasing to \u00a3120 million from April 6th, 2026).<\/p>\n\n\n CSOPs<\/strong><\/a> allow companies to grant up to \u00a330,000 worth of shares at a non-discounted purchase price to any employee or full-time director.<\/p>\n\n\n Under Save As You Earn,<\/strong><\/a> employees save a set amount from their salary each month for a specified period of time and are granted the option (i.e. the right) to buy shares in the company at an agreed future date at a discounted purchase price (i.e. exercise price), using these accumulated savings. When the plan ends, employees can either use their savings to buy shares OR choose to <\/strong>take back all contributions.<\/p>\n\n\n A SIP<\/strong><\/a> works by keeping the shares awarded in a trust for employees until they either leave the job or decide to take the shares from the plan.<\/p>\n\n\n\n If you, as an employer, decide to set up a SIP, you can choose to offer your employees either one or else a combination of four ways to get the shares: Free Shares<\/strong> (free to employees), Partnership Shares<\/strong> (paid by employees), Matching Shares<\/strong> (free to employees) and Dividend Shares<\/strong>.<\/p>\n\n\n \n
\nsimplify your employee share scheme management \u2013 from granting to task tracking,
\ntrading, compliance, tax and everything in between.
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\n<\/u><\/strong>Contact Us<\/strong><\/a><\/p>\n\n<\/div> \n\n How do HMRC-approved employee share schemes work?<\/h2>\n \n\n
1. Enterprise Management Incentive (EMI)<\/h3>\n \n\n\n
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\u2013 Grant: No tax
\u2013 Exercise: No income tax and no National insurance contributions (NIC) (if conditions fulfilled)
\u2013 Sale: Capital Gains Tax (CGT) at Business Asset Disposal Relief (BADR) rate – 10%* will be due if at least 24 months have passed from the date of grant.
\u2013 Corporation Tax relief: The option gain (the difference between the market value when the shares are acquired and the amount that the employee pays for them) and the scheme setup and administration costs<\/li>\n <\/ul> \n\n\n 2. Company Share Option Plan (CSOP)<\/h3>\n \n\n\n
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\u2013 Grant: No tax
\u2013 Exercise: No income tax if shares held for 3 years from the grant date
\u2013 Sale: CGT is applied to the difference between the share value at sale and the cost used to exercise option
\u2013 Corporation Tax relief: The spread (the difference between the market value of the option shares on the date of exercise and the exercise price), and the scheme setup and administration costs<\/li>\n <\/ul> \n\n\n 3. Save as you Earn (SAYE)<\/h3>\n \n\n\n
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\u2013 Grant: No tax
\u2013 Exercise: No income tax if shares held for 3 years from the grant date
\u2013 Sale: CGT is applied to any gain over the amount paid for the shares minus any sale expenses
\u2013 Corporation Tax relief: The cost of setting up and administering the scheme.<\/li>\n <\/ul> \n\n\n 4. Share Incentive Plan (SIP)<\/h3>\n \n\n\n
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\u2013 Free share: employers can give each employee shares worth up to \u00a33,600
\u2013 Partnership share: employees can use up to \u00a31,800 to buy shares
\u2013 Matching share: employers can give employees further shares at a ratio of up to 2:1 for each partnership share acquired<\/li>\n
\u2013 Grant: No tax
\u2013 Withdrawal: No income tax if shares held for 5 years. It\u2019s possible to withdraw earlier and income tax will be chargeable.
\u2013 Sale: CGT is applied to the difference between the share value at sale and the value at the time of withdrawal
\u2013 Corporation Tax relief: The cost of setting up and administering the scheme.<\/li>\n <\/ul> \n\n\n Summary of the 4 HMRC-approved share schemes<\/h3>\n \n\n\n