Save As You Earn (SAYE)

Save as you earn (SAYE) is a saving scheme that lets you buy shares in your company for a set time and at a fixed price, plus with a tax-free bonus at the end.

How an SAYE scheme works:

• You can save up to £500 each month for either three or five years
• After this period, you’ll get a tax-free bonus added to your savings. The interest on the money that you save is also tax-free
• At the end, you can either take this pot as cash or use it to buy shares in the company you work for. The share price is set at the beginning – so, if your company does well in the meantime and its shares grow in price, you’ll end up buying them cheaply

If you choose to buy shares, you don’t pay any Income Tax or National Insurance contributions on the difference between what you pay for them (this price was set at the beginning of the scheme), and what they’re actually worth now.

When you sell the shares, you don’t need to pay Capital Gains Tax (CGT) if your profit was less than the CGT tax-free allowance or if you put that profit into an ISA within three months – or into a pension, immediately.

SAYE schemes can be great if you strongly believe in the future of the company you work for. Otherwise, you might be better off putting your money into other tax-efficient investments.