Share Incentive Plan Calculator
Calculation Results
Enter your share details and click Calculate to see results
Potential Value at Vesting
£10,000
Net Benefit After Tax
£6,000
Detailed Breakdown
| Total Cost to Exercise | £5,000 |
| Income Tax Due | £2,000 |
| Capital Gains Tax Due | £600 |
| Total Investment | £5,000 |
| Total Return | £11,000 |
| Return on Investment (ROI) | 120% |
Value Projection
Share price growth projection chart appears here
Note: This is an estimation based on your inputs. Actual values may vary depending on market conditions, company performance, and changes in tax laws.
Understanding Share Incentive Plans
Share incentive plans (SIPs) are employee benefit schemes that provide employees with shares in the company they work for, offering potential financial benefits and tax advantages. These schemes are designed to align the interests of employees with those of the company and its shareholders.
Types of Share Incentive Plans
Enterprise Management Incentive (EMI)
A tax-advantaged share option scheme designed for smaller companies to attract and retain key employees by offering them the chance to acquire shares at a fixed price.
- ✓ No income tax on grant
- ✓ No income tax on exercise if at market value
- ✓ 10% CGT on disposal (with Business Asset Disposal Relief)
Company Share Option Plan (CSOP)
A discretionary share option plan allowing companies to grant options to selected employees up to £30,000 worth of shares per employee.
- ✓ No income tax on grant
- ✓ No income tax on exercise if held for 3+ years
- ✓ CGT on disposal
Save As You Earn (SAYE)
A savings-related share option scheme where employees save a fixed monthly amount for 3-5 years and can use these savings to purchase shares at a discounted price.
- ✓ Tax-free interest on savings
- ✓ No income tax on grant or exercise
- ✓ CGT only on disposal
Restricted Stock Units (RSUs)
A promise to give employees company shares at a future date if certain conditions are met. Unlike options, RSUs have value even if the share price doesn't increase.
- ⚠ Income tax and NICs due on vesting
- ✓ CGT on any growth after vesting
- ℹ Often subject to employer withholding tax
Key Terminology
- Grant Date
- The date when the share options are offered to the employee.
- Exercise/Grant Price
- The price at which the employee can purchase shares, often set at market value on the grant date.
- Vesting Period
- The time during which an employee must wait before they can exercise their options or receive their shares.
- Exercise Date
- The date when the employee chooses to purchase the shares at the exercise price.
- Market Value
- The current price of the shares if traded on a public exchange.
Tax Implications
Share incentive plans can have different tax implications depending on the type of scheme and how it's implemented:
- Income Tax: May be due when shares are acquired if there's a difference between the market value and the price paid.
- National Insurance Contributions (NICs): Often due alongside income tax on the same amount.
- Capital Gains Tax (CGT): Due on any profit made when the shares are eventually sold.
Tax-advantaged schemes (like EMI, CSOP, SAYE, and SIP) offer various reliefs from these taxes, making them more attractive to employees.
Important Note:
This calculator provides estimates based on current UK tax rates and regulations. Tax laws are subject to change, and individual circumstances may vary. Always consult with a financial advisor or tax professional for personalized advice.
Frequently Asked Questions
What is the difference between a tax-advantaged and non-tax-advantaged share scheme?
Tax-advantaged schemes (EMI, CSOP, SAYE, SIP) are approved by HMRC and offer specific tax benefits, such as exemption from income tax or reduced capital gains tax. Non-tax-advantaged schemes don't have these specific benefits but may offer more flexibility in their design.
When do I pay tax on my share options?
For most tax-advantaged schemes, you don't pay income tax when you exercise your options if certain conditions are met. For non-tax-advantaged schemes, you typically pay income tax (and NICs) on the difference between what you pay for the shares and their market value at exercise. Capital gains tax may be due when you eventually sell the shares.
What happens to my share options if I leave the company?
This depends on the terms of your specific scheme and why you're leaving. In many cases, if you're considered a "good leaver" (e.g., retirement, redundancy), you might keep some or all of your options. If you're a "bad leaver" (e.g., resignation, dismissal for misconduct), you might lose all unvested options. Check your scheme rules for details.
Can I transfer my share options to someone else?
Generally, employee share options are non-transferable and can only be exercised by the employee to whom they were granted. However, there may be exceptions in certain circumstances, such as transferring to family members or trustees in the event of death.
How do I know if my company's share scheme is tax-advantaged?
Your employer should provide documentation that clearly states the type of share scheme being offered. Tax-advantaged schemes must be registered with HMRC and meet specific requirements. If you're unsure, ask your HR department or refer to your scheme documentation.
Is it always beneficial to exercise share options as soon as they vest?
Not necessarily. The best time to exercise depends on many factors, including the company's prospects, your personal tax situation, cash availability, and risk appetite. Some people exercise immediately to start the capital gains tax clock or minimize income tax, while others wait for more share price growth or liquidity events like an IPO or acquisition.