Save-as-you-earn share option schemes

A savings-related share option scheme is a scheme, set up by your employer, that allows you to save gradually towards purchasing shares in the company you work for at a discount and in a tax-efficient manner.

Whether or not you will benefit from an SAYE scheme depends on the option price and on the share price at the time when you "exercise" your option and actually buy the shares.

The option price - the price you will pay - is set when you start saving and will usually be at a discount to but will not be less than 80% of the then current share price.

You may save under SAYE contracts for either three or five years (36 or 60 monthly contributions). Although you cannot alter the length of the contract once you have begun it, if you have a five-year contract you may leave your savings in your SAYE account for a further two years, making no further contributions, and qualify for a higher bonus.

The bonus you receive on a three-year SAYE scheme is equal to three monthly contributions; on a five-year scheme it is equal to nine monthly contributions and the seven-year bonus is equal to 18 monthly contributions.

You may have more than one SAYE scheme running at a time providing your total monthly SAYE savings do not exceed the upper limit on monthly contributions. You may save between £5 and £250 per month.

When your SAYE scheme matures you will receive your savings, interest and bonus free of tax. It is then up to you to decide whether to invest the sum you have built up in your company's shares. You are not required to do so. Be aware that if you do exercise your option to purchase shares and subsequently sell them, you may be liable for Capital Gains Tax on the proceeds.

See Also: Online share dealing service Stockmarket Centre Employee Share Ownership Schemes

Last Updated: March 2008 © Moneyextra.com

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