What is Save As You Earn (SAYE) Scheme?

Full Definition

Save As You Earn (SAYE), also known as a savings-related share option scheme, is an HMRC-approved scheme that must be offered to all eligible employees on similar terms (unlike EMI, which can be targeted at selected staff). Employees agree to save a fixed amount between £5 and £500 per month, deducted from net pay, into a dedicated savings account over a three-year or five-year contract period. At the start of the savings contract, the employee is granted an option to buy company shares at a price that can be discounted by up to 20% below the market value at the time of grant. At the end of the savings period, the employee chooses whether to use their accumulated savings to exercise the option and buy shares at the fixed discounted price, or simply take their savings back in cash (plus any tax-free bonus, where still offered by the scheme). Because the exercise price is fixed at the outset, employees benefit if the share price rises over the savings period while carrying no risk of loss if the share price falls, since they can simply withdraw their cash savings instead of exercising underwater options. No Income Tax or National Insurance is charged when the option is granted or exercised, provided the scheme rules and HMRC approval requirements are met, which is a significant advantage over an ordinary unapproved option. Capital Gains Tax may apply when the shares are eventually sold, based on the gain between the discounted purchase price and the eventual sale price, with the normal CGT Annual Exempt Amount of £3,000 for 2026/27 available to shelter some of the gain. Interest or bonus on the savings element (where offered) is paid tax-free. SAYE is commonly offered by large listed companies as an all-employee benefit to encourage broad-based share ownership.

See Also