UK workers miss out on £141m in tax breaks

By ignoring employee share schemes UK workers miss out on £141 million in tax breaks

16 Aug 2010

UK employees will miss out on a massive £141 million in tax breaks this year, by failing to use tax-efficient employee share schemes*, reveals, the professional advice website.

There are currently 11,330 companies running tax-advantaged employee share schemes, which give employees returns free of income tax and National Insurance.  If the 470,000 staff currently in another type of savings related share option scheme invested just £1,500 into a Share Incentive Scheme (which is just half of the maximum investment) the total tax saved would amount to £141 million.

Karen Barrett, Chief Executive of, commented, “Share Incentive Schemes are a great way of being tax efficient, and more and more companies are offering them each year.  While various share savings options existed before the Share Incentive Scheme, not all employees in a company were eligible to benefit from them.  Workers need to act now to ensure they are making the most of this tax saving option available to them.  Share Incentive Schemes can appear confusing, but meeting an independent financial adviser can help you decide whether a Share Incentive Scheme is suitable for your own financial circumstances.   An IFA can give you advice on all available savings products on the market.”

The Share Incentive Scheme, which was launched in 2001, is described by the HMRC as “the most tax-advantaged all employee share scheme ever introduced into the UK”. The main features of this scheme are:

· Employers can give up to £3,000 worth of “free shares” a year to employees free of tax and national insurance.

· Employees can buy up to £1,500 of “partnership shares” from their pre-tax monthly salary or weekly wages, free of tax and National Insurance Contribution liability.

· Employers can give employees up to two free “matching shares” for each partnership share the employees buy.

· Employees who keep their shares in the scheme plan for five years pay no income tax or National Insurance Contributions on profits made on their sale.

· Employees who take their shares out of the scheme plan after three years will pay income tax and NIC on no more than the initial value of the shares.  Any increase in value recorded while the shares where held in the plan will be free of income tax and NIC liability. As will be any dividends reinvested in more plan shares, provided those shares are held for at least 3 years.


* Source: HMRC/RAKM for  2010 Tax Action Report  

Anna Schirmer/Anna Moulds/Charli Scouller, Lansons Communications:  020 7294 3682

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Registered Office: is the consumer brand of IFA Promotion Ltd, 90 St. Vincent Street, Glasgow G2 5UB. Registered in Scotland: No. 114606

Category: Tax planning Tagged: Tax Relief

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