What is the Save As You Earn (SAYE) scheme?

The SAYE scheme, also known as Sharesave, is a UK government-approved employee share scheme that allows employees to save monthly and use those savings to buy company shares at a fixed price after a set period. It offers a structured way to invest in the employer.

How does the SAYE scheme work for employees?

Employees agree to save a fixed amount each month for a set term, typically three or five years. At the end, they can use those savings to purchase shares at a pre-agreed price or withdraw the savings without buying shares.

What are the tax benefits of the SAYE scheme?

SAYE schemes offer tax advantages because no Income Tax or National Insurance is usually payable on the difference between the option price and market value when shares are purchased. Capital Gains Tax may apply when shares are later sold.

Who is eligible for the SAYE scheme?

Most UK employees can be eligible if they meet the scheme’s criteria, such as a minimum employment period. Employers must offer the scheme on similar terms to all qualifying employees to meet HMRC requirements.

What happens at the end of a SAYE contract?

At maturity, employees can choose to buy shares at the agreed price or withdraw their savings. If the share price is lower than the option price, they can simply take their savings without loss.

Can employees lose money in a SAYE scheme?

Employees generally do not lose their savings because they can choose not to buy shares if the market value is lower. However, the potential gain depends on the company’s share price performance.

Are employers required to offer SAYE schemes?

No, employers are not required to offer SAYE schemes, but many choose to do so as part of employee benefits. The scheme must comply with HMRC rules to qualify for tax advantages.

A Guide to the Save As You Earn (SAYE) Employee Share Scheme

The Save As You Earn (SAYE) scheme also known as a Sharesave scheme is one of the most accessible and tax-efficient ways for employees to build a stake in their employer’s company. It combines a straightforward monthly savings plan with the option to buy shares at a pre-agreed price, and it comes with significant tax advantages.

This guide explains how SAYE works, who is eligible, what the tax benefits are, and what employees need to consider when their scheme matures.

How SAYE Works

Under a SAYE scheme, an employee agrees to save a fixed amount each month between £5 and £500 – over a savings period of either three or five years. The savings are deducted from net (post-tax) pay via payroll and held in a savings account with an authorised bank or building society.

At the start of the scheme, the employee is also granted an option to buy shares in their employer’s company at a fixed price the option price. This price is set on the grant date and can be set at a discount of up to 20% below the market value of the shares at that time. The option price cannot be less than 80% of the share’s market value on the date of grant.

At the end of the savings contract, the employee has a choice: use the accumulated savings to buy shares at the option price, or simply withdraw the savings in cash. If the company’s share price has risen above the option price during the savings period, buying shares at the lower option price means the employee immediately holds shares worth more than they paid for them. If the share price has fallen below the option price, the employee can simply withdraw their savings without penalty.

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Who Is Eligible?

A SAYE scheme must be offered on the same terms to all employees – it cannot be restricted to certain employees or directors. However, employers may set a minimum qualifying service period of up to five years before an employee becomes eligible to join.

At company level, SAYE is only available to employees of companies that are listed on a recognised stock exchange, or companies that are owned by a listed parent company. Employees of purely private companies cannot participate in a SAYE scheme. Participation is always voluntary – no employee can be required to join.

The Tax Advantages

SAYE is one of the most tax-efficient employee share schemes available in the UK. The main tax advantages are:

No Income Tax or National Insurance on the grant of the share option
No Income Tax or National Insurance on the exercise of the option at scheme maturity – meaning the discount embedded in the option price is not taxed as income
The interest and any bonus earned on the savings contract at the end of the scheme is received free of Income Tax and National Insurance

Capital Gains Tax(CGT) may apply if you sell the shares for more than you paid for them (the option price). For 2025-26, each individual has a CGT annual exempt amount of £3,000. Gains above this threshold will be subject to CGT at the applicable rate and will need to be reported in a Self Assessment tax return. The reduction in the annual exempt amount in recent years – from £12,300 in 2021-22 to £3,000 in 2025-26 – means that more employees with SAYE gains now need to file a Self Assessment return than previously.

To avoid CGT on the transfer of shares at maturity, employees have 90 days from the end of the savings contract to transfer their shares directly into a Stocks and Shares ISA. The transfer at that point is not a disposal for CGT purposes, meaning shares can be sheltered in an ISA without triggering an immediate tax charge. After 90 days, the opportunity to transfer without triggering CGT is lost.

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What Happens at Scheme Maturity

When the savings contract ends, employees have six months in which to decide what to do. The options are:

Exercise the option and buy shares at the option price – beneficial if the current share price is above the option price
Transfer the shares directly into a Stocks and Shares ISA within 90 days to shelter future gains from CGT
Transfer the shares directly into a pension from the scheme when it ends, which also avoids CGT on the transfer
Sell the shares immediately – any gain above the option price may be subject to CGT
Withdraw the savings in cash without buying shares – an option that makes sense if the current share price is below the option price

After six months, the right to exercise the option at the agreed price lapses.

What Happens if You Leave Your Employer

What happens to your SAYE scheme if you leave your job depends on the circumstances of your departure.

Good leavers – those who leave due to redundancy, retirement, death, ill-health, or disability – typically have six months from their leaving date to exercise their options on a pro-rata basis. The number of shares available to purchase may be reduced to reflect the proportion of the savings period completed.

Bad leavers – those who resign to take up employment elsewhere – will typically lose their options. However, their accumulated savings (plus any interest due) will be returned to them in full.

Specific rules vary depending on the scheme’s rules, so it is worth checking your employer’s scheme documentation or speaking to your HR department if you are considering leaving.

Benefits for Employers

SAYE is not just beneficial for employees. From an employer’s perspective, offering a SAYE scheme can increase employee engagement, align the interests of employees with the long-term performance of the business, and provide a cost-effective employee benefit that does not require the company to issue shares for free upfront.

The costs of establishing and running an approved SAYE scheme are allowable deductions for corporation tax purposes.

Professional Guidance on Save As You Earn Schemes

Employee share schemes like SAYE can be an effective way to reward and retain staff while offering potential tax advantages when structured correctly. At Cigma Accounting, we support businesses in Wimbledon, with nearby operations across Cheam and Morden, helping employers understand how these schemes work in practice and how to implement them in a way that aligns with both commercial goals and HMRC requirements.

Without proper planning, share schemes can create unexpected reporting obligations or fail to deliver the intended benefits for either the business or its employees. With support from Cigma Accounting, and with physical offices across London, companies can approach employee incentives with more clarity and confidence while keeping their obligations manageable as the scheme develops.