Key takeaways
- Four statutory schemes exist. A higher-rate taxpayer pays 42% on an unapproved option gain, 24% on an EMI gain, 18% where business asset disposal relief applies, and nothing on SIP shares held five years.
- EMI limits rose on 6 April 2026: gross assets from £30 million to £120 million, headcount from 250 to 500, and the exercise window from 10 years to 15 years.
- A SIP can deliver £3,600 of free shares, £1,800 of partnership shares and matching shares at 2:1 in one tax year — £9,000 in total, with no income tax after five years.
- SAYE options can be priced at 80% of market value, savings are capped at £500 a month, and the interest and any bonus at the end are tax-free.
- HMRC put the cost of these reliefs at £790 million in income tax and £440 million in National Insurance for the tax year ending 2025, of which SIP alone accounted for £470 million.
Four schemes, and the tax on the same £100,000 runs from £42,000 to nothing
Your employer has offered you shares, or an option over them, and you want to know what HMRC takes. The answer depends entirely on which scheme the offer sits in. The gap between the best and the worst outcome is, roughly, the whole of the tax.
The UK has four tax-advantaged employee share schemes. HMRC lists them as Share Incentive Plans, Save As You Earn, Company Share Option Plans and Enterprise Management Incentives — SIP, SAYE, CSOP and EMI. Two are all-employee schemes and two are discretionary, and they are charged at three different rates plus nil.
Take £100,000 of value delivered to a higher-rate taxpayer in the 2026 to 2027 tax year. Outside any scheme, that £100,000 is employment income — the position restricted stock units leave a UK employee in at vest. It is taxed at 40% income tax, with 2% employee National Insurance on top once earnings pass the upper earnings limit, so £42,000. Inside a SIP held for five years, the charge is nothing. Between those two sit the option schemes, where growth is a capital gain rather than pay: £24,000 at the 24% higher rate, or £18,000 where business asset disposal relief attaches to EMI shares.
That's the whole comparison in one paragraph. The rest of this piece is about what you have to satisfy to land in each column, because the conditions differ far more than the rates do.
What each scheme lets you receive, and who is allowed to offer it
The limits below are the statutory maxima in force for the 2026 to 2027 tax year. Each is a ceiling, not an entitlement — a scheme may set lower limits, and most do.
SIP. Your employer can award free shares worth up to £3,600 in a tax year. You can buy partnership shares out of pre-tax, pre-National-Insurance salary, capped at the lower of £1,800 and 10% of your salary for the year — limits that have applied since 6 April 2014. The employer can add up to two matching shares for every partnership share you buy. Cash dividends on plan shares can be reinvested in dividend shares, with no statutory cap on the amount since 6 April 2013.
SAYE. You sign a savings contract of three or five years and save up to £500 a month, the statutory maximum since 6 April 2014. At the end you can use the savings to buy shares at a price fixed at grant. A scheme may impose a minimum, but not more than £10 a month.
CSOP. Options over up to £60,000 of shares, a limit in force since 6 April 2023 and double the £30,000 that applied before. Exercise between three and 10 years after grant and there's no income tax or National Insurance on the difference between what you pay and what the shares are worth.
EMI. Options over shares with an unrestricted market value at grant of up to £250,000 in a three-year period, including anything granted under a CSOP. You have to work at least 25 hours a week for the company, or 75% of your total working time if that is less. Banking, farming, property development, legal services and ship building are excluded activities.
EMI's gross-asset limit quadrupled on 6 April 2026, and the exercise window went to 15 years
This is the part most comparison tables have not caught up with. Section 13 of the Finance Act 2026 raised three EMI thresholds from 6 April 2026.
Gross assets at the date of grant moved from £30 million to £120 million. The headcount test moved from fewer than 250 full-time equivalent employees to fewer than 500. The total unrestricted market value of shares under unexercised options a company may have outstanding moved from £3 million to £6 million.
The exercise window moved with them. An EMI option granted before that date had to be exercised within 10 years of grant to keep the relief. For companies on the new limits the window is 15 years, and HMRC has said existing options that have not lapsed, expired or been exercised can be amended to take advantage of it, provided the option is exercised on or after 6 April 2026.
There's a carve-out. HMRC's manual uses "Specified Company" to mean a Specified Northern Ireland Company — one registered in Northern Ireland that trades in goods or in electricity. Those stay on the old £30 million, 250-employee, £3 million and 10-year limits. In a group, which limit applies depends on which company employs you.
Grant, exercise and sale: the table nobody publishes properly
Here is what you pay at each of the three moments, for a higher-rate taxpayer in the 2026 to 2027 tax year. The chart above plots the last column of it.
| Scheme | On grant or award | On exercise or acquisition | On sale |
|---|---|---|---|
| Unapproved option | Nothing | Income tax at 40% plus 2% National Insurance on market value less price paid, if the shares are readily convertible assets | Capital gains tax at 24% on any further growth; the amount already taxed as income is added to the base cost |
| SIP, held five years | Nothing | Nothing | Nothing, if sold from inside the plan |
| SIP, taken out at three to five years | Nothing | Income tax and National Insurance on the lower of the award value and the exit value | Capital gains tax at 24% on growth after the shares leave the plan |
| SAYE | Nothing | Nothing, if exercised under the scheme rules | Capital gains tax at 24%; base cost is the option price you paid |
| CSOP | Nothing | Nothing, if exercised between three and 10 years after grant | Capital gains tax at 24%; base cost is the option price you paid |
| EMI | Nothing | Nothing, if the price is at least market value at grant and there has been no disqualifying event | Capital gains tax at 24%, or 18% where business asset disposal relief applies |
Two things fall out of the table. The first is that no tax-advantaged scheme charges anything on grant. The second is that the schemes converge at the sale stage and diverge at the exercise stage — which is where an option scheme either does its job or doesn't.
EMI's real advantage is 18 percentage points, and 24 with business asset disposal relief
The EMI relief is not a rate cut. It's a reclassification. Growth in the share price between grant and sale is taxed as a capital gain instead of as pay.
Do the arithmetic on £100,000 of growth for a higher-rate taxpayer. As employment income it costs 40% in income tax and 2% in employee National Insurance, so £42,000. As a capital gain at 24% it costs £24,000. So the reclassification saves 18 percentage points, which is £18,000 on that £100,000. Where the shares qualify for business asset disposal relief the rate drops to 18%, the bill is £18,000, and the saving widens to 24 points.
The disposal relief conditions are unusually generous for EMI shares. HMRC waives the requirement that you hold at least 5% of the voting power and nominal share capital, which is the condition that shuts most employees out. What it requires instead is that the shares were bought after 5 April 2013 and that at least two years passed between the grant of the option and the disposal. Relief is not available where the shares are acquired more than 90 days after a disqualifying event, nor where less than a year passed between grant and that event.
Here two HMRC sources disagree, and the disagreement matters. The Employee Tax Advantaged Share Scheme User Manual at ETASSUM57190 still states that where business asset disposal relief is available "capital gains tax is charged at a rate of 14% on the gain". The gov.uk guidance page for the relief says 18% on qualifying disposals from 6 April 2026, with 14% applying only between 6 April 2025 and 5 April 2026. The manual page is out of date, and so is its worked example at ETASSUM57200, which quotes a 20% capital gains rate from the 2024 to 2025 tax year. Our table of UK investment tax rates and allowances carries the current figures.
One more thing the EMI relief does not do: it does not exempt a discount. If the option lets you buy below market value at grant, income tax is charged on the lower of the discount and the difference between market value at exercise and what you paid. HMRC's own example runs a 1,000-share option granted at £5 and priced at £3, and charges income tax on £2,000.
The SIP's five-year rule removes income tax and National Insurance completely
The SIP is the only scheme where the relief covers income tax and National Insurance rather than converting them into capital gains tax. HMRC states it plainly: employees who keep their shares in a plan for five years "pay no income tax or NICs on those shares", and employers pay no employer's National Insurance either.
Put a number on it. Run the free share award, the partnership share purchase and the maximum match together and you can move £9,000 of shares into a plan in a single tax year — £3,600 free, £1,800 partnership and up to £3,600 of matching shares. Held five years, none of that is taxed as income. At the 42% combined marginal rate that's £3,780 of income tax and employee National Insurance never charged, plus £1,350 of employer National Insurance at the 15% rate, which is the employer's incentive to run one.
The mechanics of the holding period are set by sections 505 and 506 of the Income Tax (Earnings and Pensions) Act 2003, and they are graded. If shares leave the plan in under three years, the market value at the exit date counts as employment income. Between three and five years, it's the lower of the award value and the exit value for free and matching shares, and the lower of the partnership share money used and the exit value for partnership shares. In practice that means growth inside the plan escapes income tax after three years, and the original value escapes it after five.
Leaving early does not always cost you. Where you leave employment because of injury, disability, redundancy, a TUPE transfer, retirement or death, no income tax charge arises at all. That is the good leaver rule at section 498.
Capital gains tax is handled separately and generously. Sell from inside the plan and there is no capital gains tax on the disposal. Take the shares out and keep them, and the base cost resets to the market value on the day they leave — so the growth inside the plan is exempt from capital gains tax as well as income tax. If you sell later, the share identification rules that pool your holdings apply from that point in the ordinary way.
SAYE prices the discount into the option and refunds you if the shares fall
SAYE is the oldest of the four, introduced by the Finance Act 1980, and it works differently from the others. The discount is not a benefit taxed later. It is written into the exercise price at grant.
Paragraph 28 of Schedule 3 requires that the price "must not be manifestly less than 80% of the market value of shares of that class at that time". So a 20% discount is legal on day one and is never charged to income tax, provided the option is exercised under the scheme rules. Exercise within three years of grant because of a takeover or a winding-up and the relief can be lost.
The savings side is separate and tax-free in its own right. Bonuses and interest under a certified SAYE contract are not taxable under section 702 of the Income Tax (Trading and Other Income) Act 2005. If the shares fall below the option price you simply don't exercise, and you take the cash back.
On sale, the capital gains base cost is the actual exercise price you paid, not the market value on the day. That is deliberate — paragraph 10(4) of Schedule 7D of the Taxation of Chargeable Gains Act 1992 disapplies the usual market-value rule. It also means the discount ends up inside the taxable gain rather than escaping tax altogether.
Both SAYE and SIP shares can go into an ISA, up to £20,000 and within 90 days of coming out of the scheme, using the same allowance as any other subscription. From that point no capital gains tax is due on the shares. The ISA rules on transfers and flexibility govern what happens next.
The objection: all four reliefs are a bet on one company's share price
The strongest case against reading any of this as an opportunity is concentration. A relief only has value if the shares do. Every scheme above delivers a single holding in the company that also pays your salary, so your job and a slice of your savings sit on the same balance sheet.
HMRC's own statistics show how uneven the outcomes are. In the tax year ending 2025 the average value of options per grant was £13,930 for EMI and £11,080 for CSOP, £5,450 for SAYE, and the average SIP award was £220. The same release notes there were "far fewer exercises than grants for EMI" that year, and gives the reason: options get exercised when the outcome is beneficial and left alone when it isn't. An option that expires unexercised has a tax rate of nothing on a value of nothing.
Nor do most people get a choice. In the tax year ending 2025, 20,650 companies operated a tax-advantaged scheme, and 90% of them ran an EMI scheme. Of the companies operating EMI, 98% ran no other tax-advantaged scheme at all. Comparing four schemes is useful for understanding what you have been offered. It very rarely describes a menu.
There is a second objection, about who the reliefs reach. SIP was the largest single scheme by cost of relief at £470 million in the tax year ending 2025, and it is an all-employee scheme with a £220 average award. EMI carries a £250,000 individual ceiling and is offered at the employer's discretion. The biggest relief per person and the biggest relief in aggregate belong to different schemes.
What this comparison cannot tell you
These are the limitations, and there are several.
The figures are statutory maxima, not offers. Almost every scheme in practice sets lower limits, and a SIP that awards £220 on average is not awarding £3,600.
The rates are the 2026 to 2027 rates for a taxpayer in England, Wales or Northern Ireland. Scottish income tax rates differ on earned income, which changes the income tax half of every comparison here, though not the capital gains half.
Every capital gains figure ignores the £3,000 annual exempt amount, which shelters the first £3,000 of gains in the 2026 to 2027 tax year. Restricted shares, disqualifying events, National Insurance elections that transfer the employer's liability to you, and readily convertible asset status can each move the numbers in a specific case.
And a tax rate is not a return. Nothing above says anything about whether the shares are worth holding — HMRC's data cannot tell you that, and neither can a comparison table.
What would change this
If the capital gains rate rose to meet the income tax rate, the EMI advantage would shrink toward zero and the SIP's exemption would become the only relief still doing real work. The 18-point gap between 42% and 24% is the entire mechanism, and it is set by two rates that move independently.
If business asset disposal relief were withdrawn, EMI would lose the 18% rate and revert to 24%, which is what SAYE and CSOP already deliver with far lighter qualifying conditions. That relief has moved twice in three tax years — 10%, then 14%, then 18% — and HMRC's own manual has not caught up with the current figure.
If your employer becomes a Specified Northern Ireland Company, or ceases to be one, the EMI limits that apply to your options change with it. That is a live distinction from 6 April 2026 and it is not visible in the option agreement.
The thing to watch isn't the rate. It's the date on your option agreement and the exercise window written into it, because those decide which set of rules you are in. LedgerTouch tracks a single-company holding alongside the rest of a portfolio, which is where the concentration this piece describes becomes visible as a weight rather than a footnote.
This article is for informational purposes only and is not financial advice.