Tax and employee share schemes

tiemadmin • 20 June 2024

There are a number of government approved share schemes which offer various incentives to employees. The rules of the schemes vary but they are all designed to help incentivise employees by giving them the opportunity to invest in their employer's business. This in turn helps businesses retain and recruit key staff by offering tax efficient benefits.

They can be tax advantaged or non-tax advantaged. The tax approved schemes are Share Incentive Plans (SIPs), Save As You Earn (SAYE) schemes, Company Share Option Plans (CSOPs) and Enterprise Management Incentive (EMI) schemes. You can also qualify for tax advantages if you are an employee shareholder.

Some employers offer employee share schemes which are not approved by the government. The purchase of shares in unapproved share schemes are subject to the usual tax rules. These schemes are called non-tax advantaged share schemes, which can be:

  • ‘acquisition schemes’, which give an employee free or discounted shares; or
  • ‘share option schemes’, where an employee can buy shares.

Employees may also receive dividends if they own shares. These are taxed in line with the usual rules.

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