Employers can enjoy a range of tax reliefs related to the employment of workers.
One such relief is the Share Incentive Plan, which allows for an employer to give shares to employees as part of their remuneration package. This can be done in a number of ways, and we will explore them in this blog post.
Keep reading to find out more about the Share Incentive Plan and how it can benefit your business!
What are Tax Breaks?
A tax break is a reduction in the amount of tax that you are liable to pay. There are a number of different tax breaks that companies can take advantage of in the UK, and the Share Incentive Plan is just one of them.
The Share Incentive Plan
The Share Incentive Plan (SIP) is a government-approved scheme that allows employers to give shares to their employees.
Employees can buy up to £1,800 shares of the company they work for. The government pre-taxes these deductions from your paycheck, so you save money on income tax and national insurance contributions. Your employees can leave their dividends in the scheme and pay no taxes on them for five years. On average, each employee pays £80 a month into the scheme. So, if 500 employees participate, you will see approximately a £55,000 boost to your organisation as a whole.
SIP can be carried out in one of two ways:
1. Salary Sacrifice Method
Through the salary sacrifice method, employees agree to forgo part of their salary in return for shares in the company. The amount of salary that can be sacrificed is limited to £250 per month, and the maximum number of shares that can be bought is 500.
2. Cash Equivalent Method
The second way to carry out a SIP is by using the cash equivalent method. This means that employees use their own money to buy shares in the company. The maximum number of shares that can be bought is 500, and there is no limit on the amount of money that can be spent.
What are the Benefits of SIP?
There are a number of benefits for employers who implement the Share Incentive Plan. Firstly, it can help to boost employee morale and motivation as they feel more invested in the company. Secondly, it can be used as a tool to attract and retain high-quality employees. Finally, it can help to create a more positive image of the company, which can be beneficial in terms of marketing and PR.
If you are looking for ways to reduce your tax bill and boost employee morale, the Share Incentive Plan could be a good option for you to consider.
Who is Eligible for SIP?
If you are an employee paying UK tax on your employment income, you are eligible to participate in SIP. However, there are a few exceptions, such as directors of the company, members of the armed forces, and employees who work outside of the UK.
The tax benefits received from these types of plans shouldn’t be underestimated; however, SIP administration is often complicated and can waste time and resources. To avoid this problem, many companies choose to partner with professional administrators who will manage the logistics.
If you would like to get further guidance on managing your SIP, get in touch today.
