Save As You Earn (SAYE)

Save As You Earn (SAYE), often called Sharesave, is one of four tax-advantaged share schemes overseen by HMRC. Employees commit to save between £5 and £500 a month into a savings contract running for three or five years. At maturity they may either take their savings back as cash, or use the pot to buy company shares at an option price set at the start - discounted by up to 20% from the share price on the launch date.

No income tax or NI is due when the option is granted or exercised. If the shares are sold immediately on exercise, only Capital Gains Tax (CGT) applies, and the gain can usually be sheltered by the annual CGT exempt amount or by transferring shares into an ISA within 90 days of exercise.

Worked example: Lina joins a 3-year SAYE contract at £200 a month with a 20% discount. The launch share price is £10, so her option price is £8. She saves £7,200 over the term. At maturity the share price is £14. Exercising her option costs £7,200 and gives her 900 shares worth £12,600 - a £5,400 paper gain at zero income tax cost. Selling immediately and using her CGT allowance leaves the gain largely untaxed. If the share price had fallen below £8, she would simply have taken her £7,200 back in cash. SAYE deductions appear on payslips as a savings line, not a tax-deductible item.