How are Company Share Option Plan (CSOP) options taxed in the UK?

Full answer

A Company Share Option Plan (CSOP) is an HMRC tax-advantaged scheme that lets a company grant employees and full-time directors options to buy shares at a fixed price set on the grant date. The maximum value of shares (at grant) that one person can hold under unexercised CSOP options is capped by statute, and the option price must not be less than the market value of the shares when granted. The key tax benefit is on exercise. If you exercise the option at least three years after grant (or earlier in certain good-leaver situations), there is normally no Income Tax and no National Insurance charge on the difference between the exercise price and the market value at exercise. By contrast, exercising a non-tax-advantaged option triggers Income Tax (and often NI) on that whole gain - employee NI for 2026/27 is 8% up to GBP 50,270 and 2% above, so the saving can be substantial. When you eventually sell the shares, Capital Gains Tax applies to the growth above your base cost (broadly the price you paid plus any amount already taxed as income). For 2026/27 the CGT Annual Exempt Amount is GBP 3,000, with CGT charged at 18% within your basic-rate band and 24% above it. Worked example: you exercise after three years, paying GBP 10,000 for shares then worth GBP 40,000 - no Income Tax or NI on that GBP 30,000. You later sell for GBP 50,000. Your gain is GBP 40,000; after the GBP 3,000 exemption, GBP 37,000 is taxable at 18% or 24%. If you exercise before the three-year point without a qualifying reason, the gain at exercise is taxed as employment income instead. Use a capital gains tax calculator to estimate the CGT due on a future sale.

Try the calculator