What is a save as you earn scheme?
Answered 17 March 2026
What is a Save As You Earn (SAYE) Scheme?
A Save As You Earn (SAYE) scheme is a tax-advantaged, all-employee share option scheme. Here is a summary of how it works:
What the law says
A SAYE scheme is a "linked savings arrangement" under which an individual who is eligible to participate in a Schedule 3 SAYE option scheme enters into a contract to make periodical contributions for a specified period for the purpose of being able to obtain and exercise rights (i.e. share options) under the scheme. To qualify, the arrangement must be certified by the Commissioners for HMRC.
The key tax benefit is that no income tax liability arises in respect of interest (including any bonus) payable under a certified SAYE savings arrangement.
HMRC guidance / practice
An approved SAYE plan is savings-related and allows an employee or director to acquire an option to buy a certain number of shares at a fixed price at a particular time. Key features include:
- All employees and directors (full or part-time) are eligible to participate, though a company can specify a qualifying period of up to five years' employment before participation.
- Participants enter into a special savings contract to buy shares at the end of a fixed term.
- Monthly savings must be between £5 and £500, paid weekly or monthly from salary or wages.
- The savings term is either 3 years (36 monthly contributions) or 5 years (60 monthly contributions).
- Schemes are run by the National Savings Bank, Trustee Savings Bank, and building societies.
- No NICs or income tax charge arises when the proceeds of the savings are used to buy shares. However, an income tax charge does arise if the option is exercised within three years due to a takeover or sale of the business unit.
- Interest, similar sums, and any terminal bonus payable under the scheme are exempt from both income tax and CGT (ITTOIA 2005, s.702).
- From 18 August 2023, bonus rates for SAYE participants are calculated with reference to the Bank of England Bank Rate.
In summary, a SAYE scheme lets employees save regularly from their salary, then use those savings (plus a tax-free bonus) to buy shares in their employer at a pre-agreed discounted price.
Citation sources
Part 6 Exempt income Chapter 4 SAYE interest Meaning of “certified SAYE savings arrangement” 703 1 In this Chapter “ certified SAYE savings arrangement ” means a linked savings arrangement which is certified under section 705. 2 In this Chapter “ linked savings arrangement ” means an arrangement— a which is of a kind specified in section 704(1), and b under which an individual who is eligible to participate in a Schedule 3 SAYE option scheme enters into a contract to make periodical contribution
Part 6 Exempt income Chapter 4 SAYE interest Interest under certified SAYE savings arrangements 702 1 No liability to income tax arises in respect of interest payable under a certified SAYE savings arrangement. 2 In this section “ certified SAYE savings arrangement ” has the meaning given in section 703(1). 3 Subsection (1) is subject to— a section 707(1) (which requires the providers of certain arrangements to be authorised), and b paragraph 7 of Schedule 12 to FA 1988 (application of exemption
Certified SAYE savings arrangements are operated by a number of financial institutions including a number of major building societies and banks (see ETASSUM34030). Under these SAYE savings arrangements, individuals to whom share options have been granted under a Schedule 3 SAYE option scheme may enter into savings contracts under which they contract to make either 36 or 60 monthly contributions. 36 monthly contributions (under the three year savings contract), or 60 monthly contributions (under
An approved Save as You Earn (SAYE) Plan is savings related and allows an employee or director to acquire an option to buy a certain number of shares at a fixed price at a particular time. All employees and directors, whether full or part-time, are eligible to participate although a company can specify a qualifying period of up to five years employment before participation. Participants enter into a special savings contract to buy shares at the end of a fixed term and: the monthly savings must b
An employer’s contribution to a Save As You Earn scheme on behalf of an employee is part of the employee’s taxable earnings (see EIM00520 onwards). Schemes are run by the National Savings Bank, the Trustee Savings Bank and building societies. The same applies to an employer’s contribution to the monthly payments under an employee’s SAYE contract.
HMRC has updated its mechanism for calculating the bonus rates for SAYE participants. From 18 August 2023 the bonus rates and early leaver rates are calculated with reference to the Bank of England Bank Rate which is available at Change in bonus rates for Save As You Earn (SAYE) Share Option Schemes - GOV.UK (www.gov.uk) The Monetary Policy Committee (MPC) set the Bank of England Bank rate, the new Bank rate usually applies from the day following the MPC meeting and the new bonus rate will appl
Interest or similar sums, and any terminal bonus, payable under a certified contractual savings scheme (Save as You Earn) and arising from a deposit with the Department of National Savings or a bank, or shares in a building society, are exempt from income tax and capital gains tax (ITTOIA05/S702).