The HM Revenue & Customs (HMRC) Save As You Earn option plan (SAYE) is a popular and long established method of providing tax efficient share options to employees. SAYE plans are often referred to as “Sharesave” or “Savings related” plans. The main features of SAYE are:
- Companies offer their employees the option to buy shares in the company at a future date.
- All eligible employees must be offered the opportunity to participate in the plan.
- The option may be granted at market value (taken at the date of grant) or at a 20% discount to the market value.
- Employees save between £5 and £250 per month out of taxed pay on a fixed savings contract.
- When the contract matures, employees receive a tax-free bonus (based on a fixed interest rate) and decide at that time whether to use the proceeds to buy the shares or take the cash and the bonus.
- The exercise of the option (in most circumstances) is tax free for employees.
- The SAYE helps solve the employer’s national insurance contributions (NICs) problem on exercise of the option.
- Companies of all sizes and whatever their business can establish an SAYE.
- Some companies cannot establish an SAYE because of their ownership structure.
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