More work to be done to increase uptake of employee share schemes
Fiona Bell, partner at RSM UK, comments on HMRC’s latest Employee Share Scheme statistics:
“UK employees have a range of opportunities to buy shares through their employer which offer statutory tax benefits, not only when the shares are acquired, but they can also be entitled to 100% tax relief on future capital gains.
“The statistics reveal that employees received shares or the right to buy shares through Share Incentive Plans (SIPs) and Save As You Earn Share Option Plans (SAYEs), totalling £2.95bn. Both these schemes allow discounts on the price of shares, up to 20% on an SAYE option and up to 100% for a SIP award. On top of this, future capital gains can be tax free, on an SAYE by transferring into an ISA and for a SIP by keeping the shares in the plan until sale. Despite the attractive tax reliefs, only 800 companies ran a SIP and 480 ran an SAYE in the year to 5 April 2025. The low take up may be because they are perceived as being limited to listed companies, however, that’s not the case as any company can set them up, although the extra administration may deter smaller companies looking for a flexible plan.
“In contrast, there were 18,570 companies with an Enterprise Management Incentive Plan (EMI) and 1,390 with a Company Share Option Plan (CSOP). These schemes allow companies to choose who can participate and clearly this flexibility is more popular. EMI schemes provide a larger allowance on the value of shares that can receive tax relief. Whilst aimed at smaller, growth companies, last Budget’s uplift in the limits to 500 employees and £120m gross assets is expected to boost uptake in subsequent years. CSOPs have no limits on the size of the business, which ought to make them more popular, but they can be less flexible and have an award value limit of just £60,000 compared with £250,000 for an EMI. HMRC has not followed the professional bodies’ suggestions to lift the CSOP limit.
“In total, during the tax year to 2025, employees received income tax relief of £790m and national insurance contributions (NIC) relief of £440m. On top of this, companies will have had corporation tax relief plus relief from NIC and the Apprenticeship Levy (now called Growth and Skills Levy).
“The Government continues to show its commitment to ensuring that the UK remains a place where individuals choose to live, work, and invest. On that basis, you might expect growing popularity with increasing income tax and NIC savings, but that doesn’t appear to be the case. In fact, income tax relief has fallen from £840m in the tax year 2021/22 to £790m in 2024/25, while NIC relief has fallen from £560m to £440m in the same period. Similarly, the number of companies with SIP and SAYE schemes have fallen from 1,310 to 1,170. To encourage greater use of these schemes, there may be scope for the Government to simplify the legislative requirements and boost growth without significant revenue loss to the Treasury.”