Tax and Employee Share Schemes
Share Incentive Plans (SIPs)
This gives you the option to regularly save and buy shares.
If you get shares through a Share Incentive Plan (SIP) and keep them in the plan for 5 years you will not pay Income Tax or National Insurance on their value.
You might have to pay Capital Gains Tax if you sell the shares.
You’ll not pay Capital Gains Tax on shares:
- sold, if they were kept in the plan until the point of sale
- transferred to an Individual Savings Account (ISA) within 90 days of taking them out of the plan
- transferred to a pension, directly from the scheme when it ends
If you do not transfer your shares to a pension immediately when the scheme ends, you can still transfer them up to 90 days later. You may have to pay Capital Gains Tax if they go up in value between when you buy them and when you transfer them.
There are 4 ways you can get shares under SIPs.
Free shares
Your employer can give you up to £3,600 of free shares in any tax year.
Partnership shares
You can buy shares out of your salary before tax deductions. There’s a limit to how much you can spend - either £1,800 or 10% of your income for the tax year, whichever is lower.
Matching shares
Your employer can give you up to 2 free matching shares for each partnership share you buy.
Dividend shares
You may be able to buy more shares with the dividends you get from free, partnership or matching shares (but only if your employer’s scheme allows it).
You will not pay Income Tax if you keep the dividend shares for at least 3 years.