What is a Share Incentive Plan?

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 they work for.

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 accrued gains whilst the shares are held in a SIP. This includes holding the shares in a SIP for 5-years.

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 an employee buys.
  • 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).
Source:HM Treasury| 27-02-2023