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Share Incentive Plan (SIP)

A Share Incentive Plan (SIP) is a way through which the company you work for can give you some of its shares, tax-free.

How taxes work for SIP shares:

  • if you keep these shares in the plan (meaning you don’t sell them for cash) for five years, you won’t have to pay any Income Tax or National Insurance on what they’re worth
  • you also won’t pay Capital Gains Tax if you keep these shares in the SIP until you sell them.

There are four ways you can get shares under a Share Incentive Plan:

  • free shares: your employer can give you up to £3,600 of free shares per tax year
  • partnership shares: you can buy shares out of your gross salary (before tax is taken out by your employer). You can only buy worth of either £1,800 or 10% of your pay for the whole tax year – whichever is lower
  • matching shares: your employer can also give you up to 2 free matching shares for each partnership share you buy
  • dividend shares: if your company pays dividends and you already have free, partnership, or matching shares, you can reinvest these dividends into buying more of your company’s shares. You also have to keep the dividend shares in the SIP for at least three years or else you’ll pay tax on them.

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