UK legislation provides for a number of tax advantaged employee share plans. These include the share incentive plan (SIP) and the Save As You Earn plan (SAYE).
Under the SIP, employees can purchase shares (partnership shares) from gross income and be awarded shares at no cost (free shares). Provided that the shares remain in the plan for five years, there will be no income tax or NIC on the shares. Under SAYE, employees save money from their net pay over a three or five year period and the accumulated funds can be used to exercise a share option which is granted at the beginning of the savings period.
The Government has announced an increase to the tax free limits that apply under these plans. In particular:
• the maximum value of partnership shares that can be purchased each year is increased from £1,500 to £1,800
• the maximum value of free shares that can be awarded each year is increased from £3,000 to £3,600
• the maximum value which an employee can save each month under the SAYE is increased from £250 to £500.
Who will be affected?
The measure will be relevant to all companies who operate, or are considering operating, SIPs and SAYE schemes.
The increased limits will apply for new awards made with effect from the 2014/15 tax year.
Finance Act 2013 made a number of changes to the tax treatment of HMRC approved share plans. At that time, the plan limits were not increased so we were not expecting any increase in this Autumn Statement. However, these limits had been in place for many years so the increase was well overdue and is to be welcomed. There is no increase to the £30,000 limit for shares held under a company share option plan.