Employee Share Schemes: Income Tax on Vesting and CGT on Sale UK 2026

Employee share schemes are one of the more valuable -- and more complicated -- areas of UK employment tax. The rules differ significantly depending on the type of scheme, and the consequences of getting it wrong can be costly. This guide covers the four main approved schemes and the tax treatment at each stage for 2026/27.

The Four Main Approved Schemes

HMRC recognises four types of tax-advantaged employee share scheme: Enterprise Management Incentives (EMI), Company Share Option Plan (CSOP), Save As You Earn (SAYE), and Share Incentive Plan (SIP). Each has a different structure and tax profile. Unapproved schemes -- typically Restricted Stock Units (RSUs) used by large US-listed companies -- operate outside these rules entirely.

Enterprise Management Incentives (EMI)

EMI options are the most generous scheme for employees of qualifying smaller companies. When an EMI option is granted at or above the market value of the shares on the grant date, there is no income tax or National Insurance on exercise -- the entire gain is treated as a capital gain.

On sale, the gain (disposal proceeds minus the exercise price) is subject to Capital Gains Tax. Under Business Asset Disposal Relief (BADR), the rate is 18% on gains up to a lifetime limit of GBP 1m, provided the shares have been held for at least two years and other conditions are met. Without BADR, gains are taxed at 18% (basic rate) or 24% (higher rate) after the CGT annual exempt amount of GBP 3,000.

If the options were granted below market value, the discount is treated as employment income at exercise and is subject to income tax and Class 1 NI.

Company Share Option Plan (CSOP)

CSOP allows employees to be granted options over shares worth up to GBP 60,000 at the grant date (raised from GBP 30,000 in 2023). Options must be held for at least three years. On exercise, there is no income tax or NI provided the rules are followed. On sale, the gain is subject to CGT at standard rates -- 18% basic or 24% higher -- after the GBP 3,000 annual exempt amount.

BADR is generally not available for CSOP shares in the same way as EMI, so the rates are the standard CGT rates rather than the 18% BADR rate.

Save As You Earn (SAYE)

SAYE is a savings-linked scheme that allows employees to save between GBP 5 and GBP 500 per month over three or five years. At the end of the savings period, employees can use those savings to buy shares at a price fixed at the start of the scheme -- typically up to a 20% discount to the market price at grant.

The bonus interest paid on SAYE savings is tax-free. On exercise, there is no income tax or NI, even if the shares have risen substantially in value. This is one of the most tax-efficient benefits available to employees of companies offering SAYE.

On sale of the shares, any gain above the exercise price is a capital gain. Basic-rate taxpayers pay 18% and higher-rate taxpayers pay 24%, after the GBP 3,000 annual exempt amount.

Restricted Stock Units (RSUs)

RSUs are not an HMRC-approved scheme. When RSUs vest, the value of the shares at that point is treated as employment income. Income tax is charged at your marginal rate (20%, 40%, or 45%), and both employee NI (8% up to GBP 50,270, 2% above) and employer NI (15% above GBP 5,000) apply.

Many employers operate a sell-to-cover arrangement, automatically selling a portion of vested shares to cover the tax and NI due. The remaining shares are delivered to the employee free of further income tax.

When the remaining shares are eventually sold, CGT applies on any further gain above the value at vesting. Losses on shares that have fallen in value after vesting can be treated as capital losses.

CGT Annual Exempt Amount

In 2026/27, the CGT annual exempt amount (AEA) is GBP 3,000. Any gains within this amount are free of CGT. Gains above GBP 3,000 are taxed at 18% (basic-rate taxpayer) or 24% (higher-rate taxpayer) on most assets including shares.

With AEA now significantly reduced from its historic GBP 12,300 level, careful timing of share sales across tax years has become more important. Spreading disposal of larger share holdings across two or more tax years allows you to use the annual exempt amount in each year.

Reporting Requirements

All taxable events -- exercise of unapproved options, vesting of RSUs, sale of shares -- must be reported to HMRC. If you are not already in Self Assessment, a disposal of shares typically requires registration. Employer-operated approved schemes are reportable by the employer annually, but the individual retains responsibility for any personal CGT on sale.

Plan the tax well in advance, particularly in the year shares vest or are sold. Large employment income from RSU vesting can push you into a higher tax band or trigger the Personal Allowance taper above GBP 100,000, creating an effective 60% marginal rate on income between GBP 100,001 and GBP 125,140.

Use the CalcHub Income Tax Calculator to model how share income interacts with your salary and other income in 2026/27.