The Share Incentive Plan – fit for the Twenty First Century

The government has recognised the Share Incentive Plan (SIP) is an excellent starting point for employee ownership, with its almost unbelievable tax efficiency, huge flexibility and straightforward implementation.

Key benefits of a SIP

In summary, here are the key benefits of a SIP for a company looking to offer wider employee ownership:

  • A share plan for all employees, with shares held in trust on their behalf
  • Long-term retention is rewarded – after 5 years the entire value of the shares, including gains, is free of tax
    • No Income Tax
    • No National Insurance Contributions
    • No Capital Gains Tax (“CGT”)
  • Shares can be offered free, or can be paid for out of pre-tax salary – or you can use a mixture of the two (including Buy One Get Two Free)
  • Individuals may acquire up to £9,000 worth of shares each year
  • Dividends may be reinvested
  • Corporation tax deductions for the company – and an upfront deduction in certain circumstances if the trust acquires 10% of the share capital from an individual
  • Leavers can be required to sell shares back
  • Shares can be non-voting

Can a Share Incentive Plan make a difference to my bottom line?

Evidence exists (and is growing) that employee ownership across all employees, implemented correctly and communicated strongly, can really make a difference to the bottom line. Just take a look at the recently published report on the Top 50 Employee Owned companies where productivity has grown by nearly 7% over the last year, and operating profits are up by 5%.

And if anybody in the Treasury/HMRC actually reads this blog, please they consider (or ask our Chancellor Rishi Sunak to consider!) dragging the SIP into line with modern working practices and reduce the 5 year retention period (noted above) limit down to 3 years. This would dovetail much better with the working reality of our younger employees who definitely need a break at the current time.

If you have any questions on how a Share Incentive Plan would work for your organisation contact us at or download our free factsheet.