The Government announced today that it proposes to increase the maximum amounts which employees can receive under the two tax favoured all-employee share plans in the UK.


The amount of free shares which an employee can receive in a tax year is rising from £3,000 to £3,600. The amount of savings which an employee can make for partnership shares each year increases by the same proportion from £1,500 to £1,800 (or to £150 a month).

Matching share limits are expressed by reference to a 2:1 multiple of partnership shares and so it is assumed that this limit will rise on the same basis. Following changes earlier this year, there is now no longer any HMRC limit on dividend shares, though companies are free to include limits if they wish.


The maximum monthly amount which can be saved will double from £250 to £500.

The effective date of these changes has not been announced, but it is not likely to be before 6 April 2014 and may be as late as summer 2014.

Considerations for companies

On the whole companies will welcome these changes and the related further announcement that the Government is to implement the Office of Tax Simplification's recommendations on non-approved schemes, but there are some other points to consider:

  • will the changes automatically take effect for plans? This depends on scheme rules and employee documentation. Some plans just refer to HMRC limits from time to time as expressed in relevant legislation. Others have specific numerical limits included in them. For the reasons given below, however, some companies may not want to take advantage of the changes in limits.
  • will any consents be needed if scheme rules need to be changed? Most scheme rules will allow changes as a result of legislation changing limits to take effect without shareholder approval, but scheme rules need to be looked at on an individual basis. HMRC approval may also be needed for changes to rules, as the self-certification regime does not come into effect until summer 2014. However, HMRC is likely to want to avoid a deluge of approaches for approval of amendments and hopefully may take the view that these changes can be made without approaching them.
  • will scheme literature/websites for employees need to be changed? Underlying systems will also need to be updated. Will companies with international plans need to make corresponding changes? It is possible that administrator charging levels might change too if there is a greater influx of savings.
  • the SAYE change will only affect new awards after the relevant date. Savings under existing awards cannot be changed. Companies may therefore wish to delay making SAYE awards until the new higher limit takes effect.  SIP savings levels can normally be modified much more easily, but free share awards may also be delayed into the next tax year for the same reasons.
  • dilution/number of shares receivable. The increase in the limits could produce challenges for companies if it results in employees applying to receive materially more shares. Do companies have enough unissued share capital available within their scheme limits or will they need to reserve the right to scale back applications? If companies acquire the shares in the market and they allow the increases to follow through, they face up to a 40% increase in the cost of the scheme and so they may wish to manage employees' expectations quickly: while many employers currently award free shares at the maximum level, not all will want to continue doing so at the new level and matching on a 2:1 basis might also start being too expensive. Companies will also need to start looking at employees' rights under existing documentation as well as their expectations.