SIP vs SAYE: What's the Difference Between Share Incentive Plans and Sharesave?
Two different HMRC tax-advantaged schemes, two very different risk profiles — real shares now vs. a savings contract and option later.
1. How SAYE (Sharesave) Works
Save As You Earn (SAYE), often called Sharesave, is the other main all-employee UK share scheme. You save a fixed monthly amount into a savings contract for 3 or 5 years (confirm the current monthly limit on GOV.UK before relying on a figure). At the end, you have the option — not the obligation — to buy shares at a price fixed at the outset, often at a discount to the price when the option was granted.
2. Side-by-Side Comparison
| SIP | SAYE / Sharesave | |
|---|---|---|
| Mechanism | Real shares held in trust now | Savings contract + option to buy later |
| Funding | Gross salary (partnership) + employer (free/matching) | Net savings from pay |
| Employer match | Up to 2:1 matching shares | No matching — discount on option price instead |
| Risk if share price falls | Held shares can lose value | Simply don't exercise the option — savings returned in cash |
| Legislative basis | ITEPA 2003, Schedule 2 | ITEPA 2003, Schedule 3 |
3. The Key Risk Difference
Because SIP gives you real shares from day one, their value can fall as well as rise while you hold them. SAYE is structurally different: because it's an option, if the share price falls below the fixed option price, you simply don't exercise it and get your savings back in cash — SAYE has a genuine downside floor that SIP does not.
4. Tax Treatment Compared
SIP's Income Tax/NIC relief mechanics are covered in full in SIP Tax Benefits Explained. SAYE generally has no Income Tax or NIC due on the option grant or exercise within scheme rules; Capital Gains Tax may apply on eventual sale of the shares, subject to the annual CGT exemption.
5. Which Suits Which Employee
SIP suits employees comfortable holding real employer shares now and who value immediate free/matching value. SAYE suits those who want a "no downside" savings-with-optionality profile, with capital protected if the share price falls.
6. Can You Have Both?
Generally yes — SIP and SAYE are independent schemes, and if your employer offers both, there's typically no restriction on participating in each within its own limits.
Frequently Asked Questions
Does my employer have to offer both schemes?
No — employers choose which tax-advantaged schemes to offer, and many offer only one or neither.
What happens to SAYE savings if I don't want to exercise the option?
You can generally take your savings back in cash, plus any tax-free bonus/interest specified in the contract, without buying shares.
Which has the higher annual contribution limit?
The two aren't directly comparable — SIP caps are based on share value awarded, while SAYE caps a monthly cash savings amount. Confirm current limits for both on GOV.UK before comparing.
Sources
- GOV.UK, Save As You Earn (SAYE) guidance
- HMRC ETASSUM — SAYE Option Schemes
- Income Tax (Earnings and Pensions) Act 2003, Schedule 3