Out-Law News | 14 Oct 2014 | 12:36 pm | 1 min. read
Figures obtained by Pinsent Masons, the law firm behind Out-Law.com, showed that employee profits rose by 141% last year, up from £360 million in 2011/12 to £870m in 2012/13. At the same time, participating employees saved a combined £430m in income tax and national insurance by participating in a tax-advantaged scheme.
Share plans and incentives expert Matthew Findley of Pinsent Masons said that the figures showed that company share options were "not the preserve of senior directors". In addition, the recent doubling of the amount of money that employees can contribute to a SAYE scheme each month would likely encourage even more interest in the scheme, he said.
"SAYE is a highly tax efficient and risk-free route for employees to invest in the stock market, and to take a financial stake in the company they work for," he said. "Employees who have joined a SAYE scheme and then opted to sell their shares this year have really reaped the benefits of an improving stock market."
"As businesses get better at communicating the benefits of schemes like SAYE, more and more staff from companies offering them are looking to sign up. The popularity of SAYE should also increase as companies start to look more seriously at the role share schemes can play in long-term wealth creation, particularly given the shortfall in pension savings and the dramatic recent reform of the pensions market," he said.
SAYE is one of two types of 'all employee' tax-advantaged share schemes which allow employees to build up and ultimately benefit from a financial stake in their employing company. Employees who join a SAYE scheme have money deducted from their pay after income tax and national insurance each month over the life of the scheme, which is usually three or five years. This money is put aside to buy shares in their company at a discounted price.
At the end of the option period, the employee can choose to take up their option and then keep or sell the shares. If the share price of the company has fallen since the employee began to save, they can instead get their money back. In most, but not all, circumstances, no income tax will be charged on any profit made when the share option is exercised. The employee will instead be liable for capital gains tax arising when the shares are sold.
Since 6 April 2014, employees have been able to contribute up to £500 each month to a SAYE scheme if the scheme allows, up from the previous £250 per month limit.