Sharesave, also known as Save As You Earn, ''SAYE'', or the Savings Related Share Option Scheme, is a British savings scheme designed to encourage employees to buy stakes in the companies for which they work. It was introduced by the

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in 1980, with

HM Revenue & Customs HM Revenue and Customs (His Majesty's Revenue and Customs, or HMRC) is a non-ministerial government department, non-ministerial Departments of the United Kingdom Government, department of the His Majesty's Government, UK Government responsible fo ...

approval, according to a model set by the

Treasury A treasury is either *A government department related to finance and taxation, a finance ministry. *A place or location where treasure, such as currency or precious items are kept. These can be state or royal property, church treasure or in p ...

. From 6 April 2014, HMRC approval will no longer be required for a SAYE plan to obtain tax benefits, instead an employer is required to self-certify that the SAYE meets the requirements of the relevant legislation. Accordingly, from 6 April 2014, a SAYE plan should no longer be referred to as an HMRC approved plan.

Mechanism

Under sharesave, a company offers its employees the right (known as the option) to buy

shares In financial markets, a share is a unit of equity ownership in the capital stock of a corporation, and can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Share capital refers to all of the shares of an ...

in the company at a future date. The option may be granted at a discount of up to 20% of the current share price. The employee then chooses to save between £5 and £500 per month out of their net pay over a three or five-year term.

Maturation

When the contract matures, a tax free bonus is received. The employee can then choose either to exercise the option to buy the shares with the proceeds from the savings contract, or just to take the proceeds and the bonus. The bonuses are equivalent to fixed rate interest and are set by the Treasury. The savings and bonus are free from income tax. However, an employee may have to pay

Capital Gains Tax A capital gains tax (CGT) is the tax on profits realized on the sale of a non-inventory asset. The most common capital gains are realized from the sale of stocks, Bond (finance), bonds, precious metals, real estate, and property. Not all count ...

(CGT) if they sell their shares and make a profit which takes them above the CGT exemption limit for that year. An employee can transfer shares from the exercise of the option into a stocks and shares ISA, within 90 days of exercising the option. Capital gains made on these shares are then free from tax. There is a limit on the value of shares that can be transferred, and the ISA manager must agree to take them.

Conditions

Companies must offer sharesave to all employees who meet the eligibility criteria, which often include a requirement of up to five years' continuous employment.

Providers

Sharesave schemes are operated for companies by banks, building societies, or European Authorised Institutions which must first be authorised by the Treasury to operate.

Yorkshire Building Society Yorkshire Building Society is the third largest building society in the UK, with its headquarters in Bradford, West Yorkshire, England. It is a member of the Building Societies Association. The society also owns the Chelsea Building Society a ...

Computershare Computershare Limited is an Australian stock transfer company that provides corporate trust, stock transfer and employee share plan services in a number of different countries. The company currently has offices in 20 countries, including A ...

, and

Barclays Barclays () is a British multinational universal bank, headquartered in London, England. Barclays operates as two divisions, Barclays UK and Barclays International, supported by a service company, Barclays Execution Services. Barclays traces ...

are some of the domestic providers.

Reception of the scheme

The

Confederation of British Industry The Confederation of British Industry (CBI) is a UK business organisation, which in total claims to speak for 190,000 businesses, this is made up of around 1,500 direct members and 188,500 non-members. The non members are represented through the 1 ...

(CBI) and major political parties have acknowledged the benefits of employee share ownership. These benefits include an increased employee awareness of the effect of their actions on a company's success; enhanced relationships between employees and management; tax-free savings advantages for employees; expanded share-holder bases for companies; and increased employee motivation and enhanced performance.

References

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External links

* https://www.gov.uk/tax-employee-share-schemes Employee stock option Personal finance