Choosing the right tax advantaged Employee Share Scheme for your business

Written by Chris Barlow


August 31, 2023

In this day and age, standing out from competitors is crucial for both your reputation as a brand, and also as an employer.

Companies are consistently establishing more exciting and inventive methods of retaining their employees and attracting new talent, and it’s vital that you keep up with this. However, amongst some of the more glamorous and modern employee benefits, it’s important not to forget the value of an Employee Share Scheme. What better way is there to incentivise productivity than by encouraging employees to take ownership in the company they work for?

The Financial Secretary to the Treasury, Victoria Atkins, explains: 

‘Employee share schemes are an effective way to boost motivation in workforces by giving people an extra stake in what they do – and they offer a boost for business.’

Choosing the right Employee Share Scheme for your company is a big decision; one which prompts a number of questions. Who do you want to include in the scheme? How much should they be able to invest? Which is the company eligible for? 

From Employee Share Schemes for selected individuals to company-wide schemes, we’ve broken down the four main government endorsed Employee Share Schemes to help you choose which is right for your business.


Share options for selected individuals

If you would like your employees to strive for inclusion in the company’s Employee Share Schemes, then you could consider Enterprise Management Incentives or Company Share Ownership Plans.

Enterprise Management Incentives

Endorsed by the government, Enterprise Management Incentives (EMIs) are available to companies with assets of £30 million or less. These companies can grant employees share options up to the value of £250,000 within a three-year period, allowing them to hold a stake in the company.

Your employees do not have to pay income tax on National Insurance EMI shares bought at market value. However, if the shares are offered at a discounted rate, then employees are required to pay Income Tax and National Insurance on the difference between what they paid and the true market value.

To be eligible, your employees must work at least 25 hours per week; or at least 75% of their total working time for the company. Furthermore, if an employee, their spouse, parents or children already has over 30% of the shares in the company, then they are not eligible for the EMI scheme.

Company Share Ownership Plan

If your company exceeds the restrictions of an EMI, then a Company Share Option Plan (CSOP) may be more suitable. The CSOP gives employees an option to buy up to £60,000 worth of shares in the future at a fixed price. Similarly, CSOP options must not be bought for less than their market value on the day that the options are granted.

Although the maximum share option is less than on an EMI scheme, the CSOP may be more attractive to companies with a large proportion of part-time workers, who may not be able to satisfy the criteria for EMI schemes.

Gains made from the CSOP option are exempt from income tax, as long as the option is exercised for at least three years and no more than 10 years after the option is granted. Much like EMIs, employees are not eligible for CSOPs if they, their spouse, parents or children already own over 30% of the company’s shares.


Company-wide Employee Share Schemes

If you are aiming to incentivise engagement from employees at all levels, then we would recommend an Employee Share Scheme that allows company-wide involvement. Two such schemes endorsed by the government are Save As You Earn and Share Incentive Plans.

Save As You Earn (SAYE)

Save As You Earn (SAYE) is a savings-related share scheme, where employees have the option to put savings from £5 up to £500 into an approved savings account for a fixed term of three or five years. Once the contracted period of saving comes to an end, employees can use the money they have saved to buy company shares at a fixed price. The savings allowance means that employees have the potential to save up to £18,000 or £30,000!

There are multiple tax advantages associated with the scheme; employees who complete the plan are entitled to a tax free bonus, and they are not required to pay the difference in income tax or National Insurance based on what they pay for their shares.

On top of this, there are no Capital Gains Tax obligations under the SAYE scheme, if employees transfer their shares to:

  • an ISA within 90 days of the scheme ending, or
  • to a pension directly from the account immediately after the scheme ends.

It’s important to make sure that your employees are aware that although they also have up to 90 days to transfer their shares to a pension, they may be charged CGT if they don’t transfer immediately.

This is an inclusive and affordable option, particularly if you are trying to promote company involvement throughout your entire workforce.

Share Incentive Plans

If you are looking for an extremely tax-efficient scheme, then Share Incentive Plans (SIPs) may be ideal for your company. There are three ways that you can offer SIPs to your employees:

  • Free shares

You give employees up to £3,600 of free shares in any tax year

  • Partnership shares

Your employees buy shares up to a value of £1,800, or 10% of their income (whichever is lower) using their salary before tax deductions take place.

  • Matching shares

You can give up to two free matching shares for each partnership share an employee buys.

Employees can also have the option to buy more shares, using the dividends they receive from the three other plans. If they keep their dividend shares for at least three years, then employees will not be required to pay income tax on them!

Employees who keep their shares in the plan for five years will not be required to pay Income Tax or National Insurance on their value. However, they may have to pay CGT if they take them out of the plan, keep them and then sell them later on.

Choosing SIPs allows you to mould an Employee Share Scheme that works best for you and your employees. Not only can you choose which plan to use, but you can add further optional features to develop the scheme your company offers. Although SIPs must be available for all employees, you are able to set an eligibility criteria, such as a certain length of service or passing a probationary period.


At EKWilliams, we want to help our clients make sure that they make the right decision for their business and their employees. If you would like to discuss which Employee Share Scheme is best suited to your company, then please do not hesitate to get in touch with the team on 01942 816 512, or via email:

Chris Barlow, Tax Manager: [email protected]

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