What are Share Incentive Plans?

Share Incentive Plans (SIPs) were first introduced in July 2000 to give employees tax and NICs savings when they buy or are given shares in the company for which they work.

Provided all the qualifying conditions are met, shares which are obtained under a SIP are not liable to Income Tax or NICs at the time they are acquired and there is no CGT for gains whilst the shares are held in a SIP. This includes holding the shares in a SIP for 5 years.

You will not pay CGT 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.

There are four different ways that shares can be obtained in a SIP:

• An employer can give employees awards of free shares (which can be performance related e.g. based on the performance of individuals, teams, divisions or work units) up to a maximum of £3,600 p.a. tax-free
• Employees can buy shares valued at up to £1,800 per year out of their pre-tax salary. This is subject to this being no more than 10% of an employee’s annual salary
• Employers can give up to two free shares for each share bought by an employee
• Dividends from any of the free, partnership or matching shares can be reinvested tax free in the purchase of further shares (if allowed by the employer).

Our friendly Business and Tax Advisory experts are here to support you every step of the step of the way. Give them a call on 01380 723692 or email us here.