ESPP – Employee Stock Purchase Plan

An ESPP or Employee Stock  Purchase Plan is an arrangement, mainly used in the USA under which a company’s employees may purchase shares in the employer.

In the UK we have a tax advantaged arrangement under which employees can take up the right to acquire shares in their employer, paying by deduction from salary.

There are two main alternative ways of doing this (with tax advantages):

SAYE (Save As You Earn) share options:

This is an all employee savings scheme that allows participating staff to be granted options to acquire shares, saving a monthly amount towards the eventual purchase price.  They are granted an option to acquire an agreed number of shares or stock in a company at a pre-agreed price, and then over a minimum 3 year period they save a monthly amount towards the price they will pay if they decide to exercise their options.  SAYE schemes have tax advantages so that any gain in the value of the shares bought can be taken free of tax and NI, instead being subject to capital gains tax when the shares are eventually sold.

Click here for more information about how SAYE works and how we could help you set up a scheme.

Share Incentive Plan (SIP)

This is also an all employee share plan, under which employees agree to buy shares (paid for out of monthly salary deduction) or are awarded free shares.  Income tax relief is given on any salary used to buy shares, and free share awards are free of income tax.  National Insurance reliefs are also granted.

Click here for more information about how a SIP works and how we would help you set one up.