Share scheme – definition – Share incentive plans (Sip)

In a share incentive plan (Sip) employees buy shares directly from their employer (known as partnership shares) that the employer can then match (matching shares).

Employers can give their staff up to £3,000 worth of free shares per year, and staff can buy a further £1,500 of shares from their gross salary, or up to 10% of gross salary, depending on which is less.

Employers can then give up to two matching shares for every share the employee buys.

There are tax advantages of operating a Sip because no income tax or National Insurance contributions (NICs) are payable if the shares are held in the SIP for five years. 

Furthermore, shares held for over five years in the trust are free of Capital Gains Tax (CGT).

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