Employee share schemes

Employee share schemes (including the popular Enterprise Management Incentive) offer huge flexibility. They allow anything from a small group of key individuals to the entire workforce to be offered direct shares or share options/incentives in a tax efficient manner whilst encouraging staff reward and retention.

From fast-growing start-ups to established companies planning their next phase, share schemes offer flexibility and impact. Tax advantaged schemes include:

Share Incentive Plans (SIP)

SIP allows companies to offer shares in various forms with significant tax advantages, provided the shares are held in the plan for a minimum of five years. Early withdrawal triggers Income Tax and National Insurance charges, making SIPs an effective way to promote long-term employee ownership and alignment across the workforce.

Save As You Earn (SAYE)

SAYE is a savings-based share plan available to all employees. Under this scheme, employees can save up to £500 per month over a period of three or five years, with the option to buy company shares at a fixed price. Provided the conditions are met, any difference between the price paid and the market value when buying the shares is free from Income Tax and National Insurance. SAYE is particularly suited to employees who prefer a lower-risk route to ownership by building their stake gradually through regular savings.

Company Share Option Plan (CSOP)

CSOP is a discretionary share option scheme that allows employers to grant selected employees options to acquire shares, up to a total value of £60,000 per individual (for options granted after April 2023). These options must be granted at an exercise price that is at least equal to the market value of the shares at the time of the grant. If the options are exercised between three and ten years after being granted (and provided all conditions are met) the gain is exempt from Income Tax and National Insurance. CSOPs are typically used to reward or retain key or senior staff.

Enterprise Management Incentives (EMI)

The EMI scheme is a highly flexible, discretionary share option plan designed to help smaller, high-growth companies attract and retain key staff. It is available to companies with fewer than 250 (500 from 6 April 2026) full-time employees and gross assets not exceeding £30 million (£120m from 6 April 2026), though certain sectors such as banking, legal, and farming are excluded. Employers can grant options worth up to £250,000 per employee, and must notify HMRC within the required deadlines to retain the tax advantages. Provided the conditions are met and there are no disqualifying events, any gain made on exercising the options can be entirely free of Income Tax and National Insurance, and could be subject to Business Asset Disposal Relief for Capital Gains Tax purposes, where the conditions are met.

Each can provide a different tax-efficient way to share equity, often with significant benefits for both the business and the individual, and in some cases, can also extend to non-executive directors. Capital Gains Tax (CGT) may be due on the sale of shares from any of the four schemes, unless transferred to an ISA/pension within 90 days.

There is also the potential of a more generic non-tax advantaged scheme. These schemes typically fall into two categories: acquisition schemes, where employees purchase shares at market value or receive them free or at a discount, and share option schemes, which grant the right to buy shares at a future date. Both schemes are subject to Income Tax and NICs at grant/exercise and may still qualify for CGT on disposal.

Come and talk to our team about the different options and we can help design a scheme that’s just right for your business.