ETASSUM34080 | Schedule 3 SAYE option schemes: Linkage to savings (arrangement): Bonuses and interest

Pargraph 26 Schedule 3 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)

Bonus rates are expressed as the number of monthly contributions comprised in 3 or 5 year bonuses.

If the savings contract is completed and the 36 or 60 monthly contributions made, the employee is entitled to a bonus equivalent to the specified number of monthly contributions referred to in the relevant prospectus.

If the contributions are repaid after 3 years or 5 years, as applicable, a bonus is payable.

If application for repayment is made before the 3 or 5 year point, the employee is not entitled to any bonus, but is entitled to interest. The relevant percentage rate of interest is calculated in line with the SAYE bonus rate automatic mechanism and the SAYE prospectus. (this link goes to the specimen bank version of the prospectus on gov.uk. The prospectuses for building societies and European institutions contain the same terms and are available on request to HMRC)

Bonuses and interest received are not taxable (Section 702 ITTOIA 2005).