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If you receive free shares in the company you work for, you usually have to pay income tax and NICs on them because they are part of what you earn from your job. However, if you take part in a Share Incentive Plan, you will not have to pay income tax or NICs on the value of free or matching shares awarded to you. The longer you keep the shares in the plan, the less tax and NICs you will pay when you finally take them out.

Your plan shares are held in a trust for a holding period of at least three years. Your employer can increase this holding period to up to five years. You can take your partnership shares out of the plan at any time, but you will normally have to pay some tax and NICs on them if you take them out less than five years from the date that you bought them.

To get full income tax and NICs advantages, you will have to keep all the shares in the plan for at least five years (or three years for dividend shares). These time limits are explained in the table below.

If you keep your shares in the plan until you sell them, you will not have to pay Capital Gains Tax (CGT) on the gain you make, however much the shares grow in value.