UK Corporates Press Chancellor to Cut SIP Holding Period to Expand Employee Share Ownership

More than 50 of the UK’s leading companies, including Vodafone, Diageo, Wickes, Experian, and Pearson, have called on the Chancellor to deliver a simple reform to Employee Share Incentive Plans (SIP) in this week's Autumn Budget.

In an open letter to Rachel Reeves, they urge the Government to reduce the mandatory SIP holding period from five to two years, making it easier for millions of workers to become company shareholders.

This letter comes at a key moment after the Chancellor’s Mansion House speech, in which she set out a clear ambition to see more ordinary people investing in the stock market. The signatory companies believe the current five-year SIP holding period acts as a barrier to wider employee participation. Lowering the requirement to two years would bring the scheme into line with modern working practices and further the Government’s goal of encouraging both company and employee investment in Britain’s future.

The reform would empower more people to benefit from share ownership, promote savings, and support nationwide economic growth.

SIPs enable eligible employees of a company to acquire shares in either their employer company or, in the case of a group plan, the holding company. A SIP is a tax-advantaged share plan and, provided that certain criteria are met, shares can be acquired free of tax.

If the employee leaves the company within three years after the shares are acquired, the employee will be obliged to pay income tax (and possibly NICs) on the market value of the shares at the date of leaving. An employee who leaves between three and five years after the shares are acquired will pay income tax on the lesser of the market value of the shares when they were awarded and their market value at the exit date.

Sophie Altaf, Head of ProShare, the Employee Share Ownership (ESO) industry body - which helped coordinate the letter - said: “In her Mansion House speech, the Chancellor made it clear that she wants to see an increase in ordinary, often first-time, investors in the stock market. Greater investment in Employee Share Ownership plans would help achieve this.

There are a number of HMRC-approved Employee Share Ownership (ESO) schemes which allow employees to purchase shares in the company they work for, often at a discount and in a tax-efficient manner, giving employees an ownership interest in their employer.

Over a million people every year invest in a tax advantaged share scheme and there are two ‘flagship’ plans which companies can offer to all employees - Save As You Earn (SAYE) and Share Incentive Plans (SIPs).

“By reducing the SIP holding period, the Chancellor can help unlock share ownership for many more working people, connect them more closely with their employers, and give British businesses a vital new tool for attracting and retaining top talent.

“A simpler, more accessible SIP will boost financial inclusion, transform saving habits, and create a workforce truly invested in the UK’s economy.

Kirsteen Sullivan MP, Labour and Co-operative, said:

"With the Government’s ambitious agenda to support staff, back British business and encourage share investment, modernising employee share ownership plans has an essential role to play."