SIP Terms Glossary: Partnership, Matching, Dividend Shares & More
Bikash Roy
Online Research Specialist · SEO Strategist · Web Developer
Bikash personally verifies every calculator against official standards (WHO, NIH, government data). Online research specialist, SEO strategist, and web developer with 10+ years building accurate digital tools.
Full bio →UK Share Incentive Plans combine several distinct share types and rules under one scheme. Here’s what each term means for the Share Incentive Plan calculator.
Partnership Shares
Shares the employee buys using salary deducted before Income Tax and National Insurance, up to £1,800/year or 10% of salary (whichever is lower) under 2025/26 HMRC limits. Partnership Shares always belong to the employee outright — they can never be forfeited, even if the employee leaves the company early, since the employee paid for them.
Matching Shares
Free additional shares the employer awards based on how many Partnership Shares the employee buys, up to a 2:1 ratio. Unlike Partnership Shares, Matching Shares can be subject to forfeiture under some employer scheme rules if the employee leaves within a specified holding period — check your specific scheme’s plan document, since this isn’t a universal rule.
Free Shares
Shares given by the employer with no employee purchase required, up to £3,600/year, often tied to company or individual performance, or awarded equally to all eligible employees. Like Matching Shares, Free Shares can sometimes be subject to forfeiture on early leaving, depending on the specific scheme’s rules.
Dividend Shares
Shares purchased by reinvesting dividends paid on shares already held in the SIP trust, with no fixed annual cap (unlike the other three share types). Dividend Shares must generally be held for 3 years to retain their tax-free treatment.
SIP Trust
The trust structure that holds all SIP shares on behalf of participating employees. Shares stay in the trust until either the employee chooses to withdraw them, the employee leaves the company (which triggers automatic withdrawal), or another qualifying event occurs.
Holding Period
The length of time shares stay in the SIP trust, which directly determines the tax treatment on withdrawal: full Income Tax and NIC under 3 years, tax on the lower of award or removal value between 3 and 5 years, and no tax at all at 5+ years. See the Share Incentive Plan calculator for the full breakdown by holding period.
Good Leaver / Bad Leaver
Some employer SIP scheme rules distinguish between “good leaver” circumstances (redundancy, retirement, ill health, and similar) and other reasons for leaving, sometimes applying different forfeiture rules to unvested Matching or Free Shares depending on which category applies. This distinction is set by the individual employer’s scheme, not a universal HMRC rule — always check your specific plan document. See what happens to SIP shares when you leave your job for the full breakdown.
ISA Transfer (90-Day Rule)
SIP shares can be transferred into a Stocks and Shares ISA within 90 days of removal from the SIP trust without triggering Capital Gains Tax, and the value transferred counts toward the annual £20,000 ISA allowance. See SIP shares and Capital Gains Tax for the full CGT picture after shares leave the trust.
Ready to calculate your own SIP allocation? Use the Share Incentive Plan calculator, or see SIP calculator examples for the math applied to different salaries and holding periods.