What Happens to Your SIP Shares If You're Made Redundant?

Losing your job is stressful enough without wondering what happens to the shares sitting in your Share Incentive Plan (SIP).

If you've just been told you're being made redundant, one of the practical questions on your mind is probably what happens to SIP shares if you're made redundantand whether you'll lose value you've built up over months or years of participation.

The short answer is reassuring for most people. Redundancy is one of the specific circumstances that HMRC and most UK employers classify favorably, meaning you're not typically penalized the way you would be if you simply resigned.

But the details depend on your specific scheme rules, so it's worth understanding exactly how this works before you make any decisions.

Quick Answer: SIP Shares and Redundancy

If you're made redundant, your SIP shares are usually treated under good leaver rules. This generally means you keep your Free and Partnership Shares, and any Income Tax or National Insurance relief already earned typically stays intact if the shares have been held long enough.

Understanding "Good Leaver" Status in a SIP

Under most share incentive plan redundancy rules, leavers are sorted into two categories: good leavers and other leavers. Redundancy almost always falls into the good leaver category, alongside reasons like retirement, ill health, injury, disability, and death.

Being classed as a good leaver matters because it usually means the following:

• You don't forfeit shares you'd otherwise lose by leaving early

• Tax relief already accrued is generally protected

• You get a defined window to decide what to do with your shares

That said, "usually" is doing some work in that sentence. Each employer's SIP has its own trust deed and scheme rules, approved by HMRC but written individually.

This is why two people made redundant from different companies can have genuinely different outcomes even though both are classed as good leavers.

How Each Share Type Is Affected

A SIP typically holds up to four types of shares, and redundancy doesn't necessarily treat them all the same way.

Free Shares

These are shares your employer gave you at no cost, usually tied to performance or simply as a benefit of employment. As a good leaver SIP sharescase, you generally keep your Free Shares outright, along with the tax advantages already built up if you've held them for the required period.

Partnership Shares

These are shares you bought yourself, usually through salary deductions before tax. Because you paid for them, partnership shares redundancy treatment is typically the most straightforward.

You keep them regardless of leaver status, since they were never conditional on continued employment in the first place.

Matching Shares

Matching Shares are the ones your employer gives you for each Partnership Share you buy, often on a ratio like one Matching Share per Partnership Share. This is where matching shares forfeiture becomes relevant.

If you haven't held them for the minimum holding period set out in your scheme (often three years), some schemes still forfeit unvested Matching Shares even for good leavers, while others waive this for redundancy specifically.

This is the detail most worth checking directly with HR or your scheme provider.

Dividend Shares

If your SIP reinvests dividends into more shares, SIP dividend shares redundancy treatment usually mirrors your Free Shares.

You typically keep them, though the three-year holding requirement for full tax relief may still apply depending on when they were awarded.

Tax Implications When You Leave

One of the main benefits of a SIP is Income Tax and National Insurance relief, but that relief is tied to how long you've held the shares.

• Shares held for 5 years or more when you leave: full Income Tax and NI relief, no charge on removal from the plan

• Shares held for 3 to 5 years: partial relief, with tax calculated on the lower of the original value or current value

• Shares held under 3 years: normally subject to Income Tax and NI on the current market value, though good leaver status due to redundancy can sometimes reduce or waive this depending on your scheme

Because redundancy counts as a good leaver reason, many schemes apply more generous tax treatment than they would for a standard leaver, but this isn't guaranteed across every plan. Your payslip or P45 documentation from your employer should reflect exactly what's been applied.

Selling SIP Shares After Leaving

Once you leave, your shares usually need to come out of the SIP trust within a set period, often 90 days, though this varies by scheme. At that point, you generally have a few choices:

• Sell the shares immediately and take the cash

• Transfer them into an ISA if you act within the required window and eligibility rules are met

• Transfer them into a pension scheme, subject to your pension provider's rules

• Hold them as certificated shares outside the plan, if your scheme allows this

Selling SIP shares after leavingdoesn't have to happen the same day you're made redundant, but you shouldn't ignore the deadline your scheme sets. Missing it can sometimes mean the shares are sold automatically on your behalf, which may not suit your tax position if you were hoping to use an ISA transfer instead.

What to Do Next

If you've just been told you're being made redundant, the most useful first step is requesting your SIP scheme booklet or asking your HR or payroll team directly for your scheme-specific leaver terms.

This document, not a general guide like this one, is the only source that reflects the exact rules your employer has set.

It's also worth checking your SIP dashboard or provider statement for your SIP holding period redundancy status on each batch of shares, since Free, Partnership, Matching, and Dividend Shares awarded at different times may each be at different stages of their holding period.

If you want a clearer picture of how your own SIP shares compare to other UK employee share arrangements, our Share Incentive Plan Calculator can help you understand potential value across different scenarios, and our guide on SIP vs SAYE schemes breaks down how the two most common UK plans differ.