Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Share definition

What does Share mean? A share is a unit of ownership in a company used to allocate control and economic benefit among shareholders in corporate governance and transactions. Company law in the UK (Companies Act 2006) and Ireland (Companies Act 2014) sets the framework for shares and shareholder rights, though the precise rights arise from statute and the company’s constitution. Key features include: a bundle of rights (typically voting, dividends, information and a share of surplus on winding up); limited liability (exposure capped at any unpaid amount on partly paid shares); transferability subject to statutory and constitutional restrictions; and legal title evidenced...

UK Schedule 2 SIPs: income tax, NICs and PAYE on awards, holding periods, exits and takeovers; RCAs, dividends, capital receipts and trustee obligations

Published by a LexisNexis Share Incentives expert

Practice notes

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Summary of tax treatment

The tax advantages available under a ‘Schedule 2 share incentive plan (SIP)’ are substantial indeed for both employees and employers. Staff who buy partnership shares through a SIP can avoid income tax and National Insurance contributions (NICs) at their combined marginal rate, and may enjoy tax-free increases in the value of those shares. In addition, free, matching and dividend shares can, in some cases, be obtained and disposed of without any liability to income tax, NICs or capital gains tax (CGT). Employers can reduce employer NICs and the apprenticeship levy, which can amount to a meaningful saving where many employees take part in the SIP. Shares obtained via a SIP must usually be retained for at least five years (dividend shares for three) to secure full income tax and NICs relief, which can itself operate as a strong retention tool. That said, across numerous sectors, five years exceeds the period many employees anticipate remaining with an employer, which may lessen the appeal of a SIP. This timing requirement, while useful for retention, may therefore diminish a SIP’s attractiveness in sectors with higher turnover and shorter average service than the five-year period. For broader guidance on SIPs, see Practice...

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Jonathan Fletcher Rogers

Addleshaw Goddard

Jonathan is the head of Addleshaw Goddard's Employee Incentives and Remuneration practice, and advises UK and multinational clients on the design and implementation of share and cash-based employee incentive plans. He also advises quoted companies on corporate governance and disclosure issues in relation to remuneration. Jonathan is a regular speaker at conferences on executive remuneration and share plans more generally and has been recognised as a leading individual in employee incentives in Chambers and Partners....

Web page updated on 22/05/2026

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