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Share Incentive Plan (SIP)

[ʃeər ɪnˈsɛntɪv plæn (sɪp)]



A Share Incentive Plan (SIP) acts as a way for companies to give tax-free shares to their employees. There are four main ways of distributing these shares.

More detail:

A Share Incentive Plan (SIP) is a scheme offered by companies in the United Kingdom to incentivise Employees by offering them the ability to obtain some shares in the company tax-free.

There are four ways of distributing shares in a SIP. 1. Employers can give up to £3600 of free shares in any tax year. These are called free shares. 2. Employees can buy shares out of their salary before tax deductions. These are called partnership shares. The limit is either £1,800 or 10% of their income for the tax year, whichever is lower. 3. Employers can give up to two free matching shares for each partnership share bought. 4. Employees may be able to buy more shares with the dividends they get from other shares if their employer’s scheme allows it. These are called dividend shares. Income Tax will not have to be paid if dividend shares are kept for at least three years.

If shares are kept in the plan for five years, no Income Tax or National Insurance will be owed on what they are worth. Capital Gains tax will also not be owed when shares are sold, if the shares are kept in the plan until they are sold.

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