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You receive an employee share scheme (ESS) benefit when you purchase or are given shares from your employer free or below market value.

The difference between the market value of the shares and what you paid for them will be taxable income.

Your employer may deduct tax from your ESS benefits during the year, to meet your tax obligations on this income.

If they choose not to deduct tax you’ll be responsible for paying tax on these benefits at the end of the year.

Taxing employee share scheme benefits

Your benefit is treated as income for:

  • student loan deductions
  • child support payments
  • Working for Families payments.

If you receive Working for Families, you need to let us know about your ESS benefits. If you wait for this information to come from your employer you may have to pay us back.

Your responsibilities at the end of the year

You will need to receive a personal tax summary when:

  • your employer has provided us with the taxable value of your ESS benefit
  • your employer has not deducted tax
  • you have no other reason to file an IR3.

An IR3 should be filed if:

  • you have received an ESS benefit from a scheme that is not exempt
  • your employer has not provided the information to us.

If you have not told us about ESS benefits received from previous years, you will need to let us know. You can make a voluntary disclosure for these.