Save As You Earn (SAYE) Options Plan
A SAYE scheme is an all-employee share option scheme that allows UK employees to buy shares in their company with the benefit of tax relief. Employees save a fixed amount each month (up to £250) over three or five years, and at the end of the savings/option period can, if they wish, use their savings to buy shares at a fixed price, set at the start and possibly discounted.
Because SAYE is tax-advantaged, employees do not pay income tax or National Insurance on any gain when exercising their options. Tax is only due if and when the shares are sold on any gains, usually as capital gains tax (CGT), which is often at a lower rate than income tax. The company may also receive a corporation tax deduction for the employee’s gains.
If an employee chooses not to exercise their option, they simply keep their savings (plus any bonus or interest). Those leaving due to redundancy, injury, disability or retirement can usually exercise a proportion of their options tax-free.
Key Points and Benefits
- Open to all UK employees (a minimum service period can be required of up to five years)
- Monthly savings up to £250, over 3 or 5 years
- Options can be exercised within 6 months of the savings term
- Tax-advantaged: no income tax or NICs on gains at exercise
- A proven way to build engagement and ownership
- Most independent companies can offer SAYE, provided shares meet statutory requirements
Example
An employee saves £100 per month for three years (£3,600 in total) and has the right to buy shares at £1 each. If the share price has risen to £2.50 by the end of the term, their £3,600 buys shares worth £9,000 – a gain of £5,400 free of income tax and NICs.
Get in touch with our expert team today and explore whether a SAYE is right for your business and how we can help you set one up.