By PaySlipCheck Editorial
· Reviewed by PaySlipCheck Editorial Standards Team
· 14 June 2026
· 5 min read
UK employee share schemes have three tiers of tax-efficiency. The very tax-favoured: SAYE (Save-As-You-Earn) — buy discounted shares after 3 or 5 years with tax-free gain in an ISA option. And SIP (Share Incentive Plan) — up to £3,600/year of shares tax-free if held 5 years. Middle tier: EMI options — capital gains treatment (10-20%) rather than Income Tax (20-45%). Lower tier: free/discounted shares outside these schemes — taxable as income at your marginal rate.
Verified against 4 official sources · Last reviewed 14 June 2026
At end, buy shares at discount (up to 20%) fixed at start
No Income Tax on discount, no NI
Cash out into ISA to shelter gain from CGT
Tax outcome: entirely tax-free.
SIP (Share Incentive Plan)
Free shares (up to £3,600/year) or matching shares
Held 5 years for full tax exemption
No Income Tax on receipt if held 5 years
No CGT on gain if held in scheme
Tax outcome: entirely tax-free if held 5+ years.
EMI Options (Enterprise Management Incentive)
Options granted below market value
Exercise + sell later
Capital Gains Tax on gain (currently 10-20%) not Income Tax
Available to qualifying trading companies
Tax outcome: CGT-favoured (typically 10-20% not 40-45%).
Free / discounted shares (unapproved)
Any employer share benefit outside approved schemes:
- Discount treated as taxable income
- Full Income Tax + NI on grant value
- Any subsequent gain: CGT
Example: £5,000 shares given for free at higher-rate:
- Income Tax + NI ~£2,100
- If later sold at £8,000, additional CGT on £3,000 gain
In short
SAYE + SIP + EMI = highly tax-efficient UK employee share schemes. Free/discounted shares outside these = fully taxable. Ask HR what schemes your employer offers.
Frequently asked questions
Is SAYE tax-free?
Yes — no Income Tax + NI on the discount. Move shares into ISA to shelter from CGT.
What about SIP?
Free/matching shares held 5+ years are entirely tax-free (no IT, no NI, no CGT).
EMI vs unapproved?
EMI gets CGT (10-20%) rather than IT (20-45%). Massive difference for higher earners.
Do I pay tax when granted or when sold?
Depends on scheme. SAYE: only on gain via ISA. SIP: none if 5 yrs. EMI: on sale. Unapproved: on grant.
What if I leave employer?
SAYE: continue saving or cash out. SIP: 5-year rule may reset. EMI: options may lapse.
What is a P11D — The UK P11D form is submitted annually by employers to HMRC reporting all Benefits in Kind provided to employees. You get a copy showing your total BiK for the tax year. HMRC uses this to adjust your tax code and collect BiK tax.
More on related topics
Childcare vouchers — UK childcare vouchers closed to new joiners in October 2018 — existing users can continue. Tax-Free Childcare replaced it (£2,000/child/year government top-up). This guide covers both + which is better for your situation.
Company car tax — UK company car BiK tax is calculated as list price × emission-band % × your marginal Income Tax rate. Electric cars sit at 3% BiK for 2026/27 (rising 1% per year), making them exceptionally tax-efficient. This guide covers the maths + when a company car beats a car allowance.
Company car vs allowance — UK company car is better than cash car allowance for electric vehicles (3% BiK) at higher-rate tax. Cash allowance is better for petrol/diesel cars at higher-rate. This guide covers the specific numbers.
All tax figures on this page use the same configuration that powers our
calculators — see our
editorial standards for the review process.
Last reviewed: 14 June 2026.
Next review due 14 December 2026.
Disclaimer: This page provides general information based on published HMRC and gov.scot figures. It is not personal tax or financial advice. For your specific situation, please consult a qualified accountant or contact HMRC directly.