Employee Share Incentive Plans SIPs

Published / Last Updated on 05/06/2022

Your employer gives you shares as part of a Share Incentive Plan (SIP).

Income Tax and National Insurance

No income tax and national insurance payable if you hold the shares in the scheme for 5 years.  If take the shares out of the scheme to sell or dispose of them sooner, income tax and national insurance will be able.

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 buy being the lower of £1,800 per year or 10% of your income for the tax year.
  • 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.

Capital Gains Tax

You are not liable to Capital Gains Tax on shares if you keep them in the plan until you sell them.  If/when you take them out of the plan and sell them you are liable to Capital Gains Tax if the value has increased subject your normal annual capital gains allowance remaining, if any.

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