Tax Relief for Expenses of Employment – The Share Incentive Plan

Keywords – Share Incentive Plan – tax relief for expenses of employment

Did you know, 66% of FTSE 100 companies benefit from tax breaks by providing staff with incentives?  

Apart from the tax break in itself, incentivising the jobs of employees has an added benefit of improving employee relations. In light of this information, you probably want to know how you can do the same.

The answer is simple.

Take out a share incentive plan, and you and your employees could pay less in National Insurance Contributions. In fact, a total of £120 million is saved (in total) each year in national insurance contributions via this scheme. So, if you are not already making the most of this tax break, you need to rethink.

What is a share incentive plan (SIP)?

Through this plan, employees are given a chance to purchase shares in the company they are employed by (up to £1,800). These payment deductions are taken from their gross pay, which is why you save money on tax and national insurance contributions. Once these shares are kept within the scheme for five years, your workers can then choose to receive their dividends, tax-free.

The average participant pays £80 a month into the scheme. So, if you have 500 employees taking part, you will see approximately a £55,000 boost to the overall organisation.

Who qualifies for the share incentive plan?

Any employee paying UK tax on their employment income is eligible to participate in a SIP.

Although the tax advantages of these plans shouldn’t be underestimated, SIP administration is often complicated and a drain on time and resources, as such, companies frequently partner with professional administrators to oversee the logistics.

If you would like to get further guidance on managing your SIP, get in touch today.

Closing Remarks

All in all, share incentive plans are an excellent option for employees wanting to save money by investing in shares.

Obviously, the tax break is a welcome bonus, but you will also notice that when your staff own stocks, everyone’s interests start to align better; investors, management, general staff, etc. This is because a scheme like SIP helps in commonising the goal of organisational growth.

As such, these plans help create a better working environment in addition to forging a sense of community among your team. We can keep going about the benefits of an SIP, but you get the bigger picture.

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