The short version: A Share Incentive Plan (SIP) lets your employer give you company shares with tax advantages. Keep them in the plan long enough and you won’t pay Income Tax or NI on their value.
How does it work?
There are several ways to get shares through a SIP. Free shares are given by your employer. Partnership shares you buy from your pre tax salary. Matching shares are free shares your employer adds to match your partnership shares. Dividend shares are bought with dividends you receive.
What’s the tax benefit?
Hold shares in the plan for five years and there’s no Income Tax or NI on their value. Take them out early and you’ll pay tax on what they were worth when you got them (or their value when you take them out, if lower).
What about Capital Gains Tax?
No CGT while shares stay in the plan. When you sell, any gain from the value when you took them out is potentially subject to CGT.
Got SIP shares and wondering about the best time to sell? Ask us about your options.
