Employee Share Scheme Types Compared: SAYE vs SIP vs CSOP vs EMI vs Unapproved Options vs RSUs — Limits, Tax Treatment, Holding Periods, Section 431 Election, Leaver Provisions and £10k Worked Outcomes in 2026/27
The UK has four HMRC-approved tax-advantaged employee share schemes plus unapproved options and Restricted Stock Units (RSUs). SAYE (Save As You Earn / Sharesave) is the all-employee 3 or 5-year savings contract scheme — up to £500/month from net salary, 20% option discount, no income tax on exercise gain. SIP (Share Incentive Plan) is the all-employee trust scheme combining partnership shares (£1,800/year from gross salary), free shares (£3,600/year), 2:1 matching shares and tax-free dividend reinvestment with full IT/NI exemption on 5-year hold — up to £9,000/year of share acquisitions per employee at effective ~32% government boost. CSOP (Company Share Option Plan) is the discretionary scheme for any UK employer with a £60,000 individual limit (doubled from £30k on 6 April 2023), no income tax on exercise after 3-year hold. EMI (Enterprise Management Incentive) is the SME-only scheme (gross assets ≤£30m, ≤250 FT employees) with the highest individual limit £250,000 and 10% Business Asset Disposal Relief CGT on disposal — the gold standard for tech startup equity. Unapproved options (used by foreign-parented companies and large UK companies exceeding CSOP £60k) are taxed as IT + employee NI + employer NI 13.8% on exercise gain — often 47-60% effective marginal rate. RSUs are taxed as IT+NI on full market value at vest like a cash bonus. Section 431 election within 14 days of restricted-share acquisition shifts future uplift from IT to CGT and is critical for material packages. Good Leaver vs Bad Leaver provisions determine forfeiture on departure. This side-by-side comparison walks through every scheme's limits, holding periods, tax mechanics, employer setup cost, mobility considerations and a fully worked £10,000 net-of-tax outcome for higher-rate employees across all five scheme types in 2026/27.
SAYE — Best For: General Workforce + Savings Discipline
SAYE (Save As You Earn, marketed as Sharesave) is the most common all-employee scheme. £5-£500/month savings contract over 3 or 5 years, with share option at 20% discount to start- of-contract market price. At maturity, employee chooses to either exercise (acquire shares at discount) or take cash.
When SAYE wins:
FTSE-style company with thousands of employees needing simple all-employee scheme.
Employees who value savings discipline + share upside without downside risk.
Companies where share price has historical positive trend (any upside on top of 20% discount).
Employees on basic-rate income who can spare £100-£500/month for 3-5 years.
SAYE is administratively simpler than SIP and lower cost than running an option scheme requiring valuation. Major UK employers (Tesco, Sainsbury, BT, Lloyds, NatWest, Rolls-Royce, BAE Systems) all operate SAYE programmes with high participation (40-60% of eligible employees typically). The zero-interest savings post-2014 has slightly reduced appeal but the 20% option discount + no-tax-on-exercise still provides 20%+ guaranteed return on a flat share price.
SIP — Best For: Higher Acquisition Capacity with Tax Boost
SIP is the highest-value all-employee scheme. Combines four types of share acquisitions: partnership (£1,800/year from gross salary), free (£3,600/year), matching (2:1 from employer against partnership = up to £3,600/year), dividend (tax-free reinvestment). Max ~£9,000/year of share acquisition value per employee.
When SIP wins:
Employees willing to commit 5 years for full tax exemption.
Basic-rate or higher-rate employees getting full ~32% / ~42% government boost on partnership shares from gross salary.
SMEs with limited cash who want to incentivise long-term loyalty.
Practical risk: SIP shares are tied to a single employer (concentration risk). A SIP-heavy employee at a struggling employer may be holding a depreciating asset that is difficult to diversify. Best practice: do not let SIP concentration exceed 10-20% of total household wealth. The 5-year holding requirement for full tax exemption + ISA transfer option at release helps but does not fully mitigate.
CSOP — Best For: Senior Management at Large Companies
CSOP is discretionary share option scheme available to any UK employer (no SME restriction). Individual limit £60,000 (doubled from £30,000 on 6 April 2023 to improve competitiveness with EMI). No IT on exercise after 3-year hold; standard CGT 18%/24% on disposal.
When CSOP wins:
Companies above EMI thresholds (£30m gross assets, 250 employees) — most FTSE-listed and major private.
Companies with excluded trades for EMI (financial services, property, certain hotels) but qualifying for CSOP.
Senior management grants £20-£60k where granular tax efficiency matters.
Use alongside EMI for senior employees who exceed EMI £250k cap.
The April 2023 limit doubling was material — for senior executives at growth-stage companies, £60k of CSOP options per grant cycle is meaningful equity. Combined with EMI £250k if eligible, a single executive could hold £310k of approved- scheme options simultaneously. Beyond that, additional grants must be unapproved with materially worse tax outcomes.
EMI — Best For: SME Tech Startup Equity
EMI is the most generous approved scheme by individual limit and post-disposal tax treatment, but restricted to SMEs (gross assets ≤£30m, ≤250 FT employees, qualifying trade). Individual limit £250,000; company total £3,000,000. No IT/NI on grant or exercise. CGT at 10% Business Asset Disposal Relief rate if held 2+ years from grant.
When EMI wins:
UK tech startups under £30m gross assets with under 250 employees.
Early-stage employees expecting major upside on exit (acquisition or IPO).
Founders and senior team members where £250k limit accommodates the grant.
Companies where exit horizon is 2+ years (BADR eligibility).
A typical UK tech startup early employee receiving £100k of EMI options that grow to £1m at company sale will pay ~£90k CGT (10% BADR after £3k allowance) vs ~£430k under unapproved treatment — a £340k saving on a single grant. EMI is the gold standard for UK tech compensation and a substantial part of why London/Cambridge/Manchester tech ecosystems can compete with US offers despite lower base salaries.
Unapproved Options — Foreign-Parented and Above-Limit Awards
Unapproved options sit outside the four-scheme framework. Used when: foreign-parented company uses global plan not matching UK approved scheme; UK company above EMI thresholds without CSOP; CSOP £60k exhausted for senior executive; option to a non-employee (consultant, adviser).
Tax treatment. No tax on grant. On exercise: full income tax + employee NI 8% + employer NI 13.8% on the exercise gain. Often 47-60% effective marginal rate. On sale: CGT on gain above market value at exercise.
Mitigation strategies:
Section 431 election within 14 days for restricted shares — shifts future uplift from IT to CGT.
NIC joint-election or NIC indemnity — sometimes shifts employer NI to employee at cost of IT relief on the employer NI element (net better in some cases).
Time exercise carefully — in tax years when overall income is lower (career break, sabbatical) marginal-rate tax is lower.
Exercise-and-hold vs exercise-and-sell trade-off — holding post-exercise locks in CGT on future appreciation but adds risk.
Use of capital losses elsewhere to offset CGT on subsequent sale.
Senior packages with substantial unapproved options should always involve specialist employee-tax advice at offer stage. Common saving £5-£50k per material grant via careful structuring.
RSUs — US-Style Restricted Stock Units
RSUs are conditional rights to receive shares at a future vesting date with no exercise price. Common in US-parented company UK subsidiaries (Google, Meta, Microsoft, Amazon, Apple, Salesforce).
UK tax treatment. No tax on grant. On VEST: full IT + employee NI + employer NI on full market value of shares delivered (effectively taxed as cash bonus at vest market value). On subsequent SALE: CGT on gain above market value at vest.
RSUs forfeit UK approved-scheme tax advantages — there is no UK statutory framework that maps directly. Some employers structure as "phantom shares" (cash bonus tracking share price) or convert to CSOP grants where eligible. For US-parented UK employees the choice of RSU vs SIP/SAYE participation is typically pre-decided by global compensation policy. UK tax adviser engagement at offer stage is essential for senior US-parented packages.
Section 431 Election (14-day Deadline)
Section 431 election under ITEPA 2003 s431 is a critical UK tax election for RESTRICTED SHARES. Without the election, employee taxed on UNRESTRICTED market value at acquisition AND on subsequent uplifts when restrictions lift. With the election, taxed on FULL UNRESTRICTED MARKET VALUE at acquisition (one-off), and no further IT on later restriction lifting — subsequent uplift falls in CGT.
14-DAY DEADLINE. Must be made jointly by employer and employee within 14 days of share acquisition. Hard statutory deadline — late elections not accepted. Common triggering events: CSOP exercise of restricted shares; EMI exercise of restricted shares; RSU vest with leaver provisions; founder-share purchase with vesting.
Every employee receiving restricted shares should sign within 14 days. Most company secretaries provide a pre-completed form at acquisition. Missing the deadline can cost £16k+ per £100k of uplift (40% IT vs 24% CGT differential). For senior packages with multi-million-pound restricted awards the cost is correspondingly higher.
Good Leaver vs Bad Leaver
Most UK employee share schemes include leaver provisions determining what happens to unvested awards on departure.
Good Leaver — death, disability, redundancy, retirement at agreed age, sale of company, mutual termination. Usually retain unvested awards (or accelerated vest); exercise window 6-12 months post-leaving; favourable tax treatment continues.
Bad Leaver — voluntary resignation, dismissal for cause, gross misconduct. Usually forfeit unvested entirely; may be required to sell back vested shares at acquisition cost; lose favourable tax treatment.
Common dispute areas: definition of "Cause" (drafted broadly by employers); accelerated vesting on Change of Control (single-trigger vs double-trigger); notice period treatment during garden leave or PILON; lookback periods on dismissal.
For senior executives, negotiation of leaver terms is a key part of the equity package. Specialist employment-and-equity legal advice essential for £100k+ packages. Employees should review leaver definitions BEFORE accepting an offer and BEFORE resigning.
£10k Worked Comparison Across All Five Types
Higher-rate (40%) employee, £10,000 of equity participation across five schemes over 5 years, share price doubles from £10 to £20.
Scheme
Employee cost
Gross value 5y
Tax
Net profit
SAYE (£167/mo × 5y, 20% discount)
£10,000 saved (returnable)
£25,000 on exercise
£0 ISA / ~£2,160 non-ISA
£12,840 - £15,000
SIP (max participation 5y)
~£5,220 net (£9k gross from pre-tax)
~£54,000 with match
£0 on 5y hold + ISA
~£48,780
CSOP (£10k options, 3y+ hold)
£10,000 exercise
£20,000
~£1,500 CGT
~£8,500
EMI (£10k options, 2y+ BADR)
£10,000 exercise
£20,000
~£700 CGT (10% BADR)
~£9,300
Unapproved options
£10,000 exercise
£20,000
~£5,580 IT+ee NI+er NI
~£4,420
On equivalent £10k of exercise cost, EMI delivers the highest net (~£9.3k), CSOP slightly behind (~£8.5k), unapproved roughly half (~£4.4k). SAYE and SIP have different cost profiles: SAYE returns the £10k savings + gain on top; SIP requires only ~£5k net cost for ~£49k net profit due to the match and gross-salary purchase. Conclusion: scheme structure matters enormously. EMI delivers 2.1x better net than unapproved on equivalent gross; SIP delivers transformative outcome via matching shares and gross-salary purchase.
Frequently Asked Questions
Which UK employee share scheme is most generous?
EMI (Enterprise Management Incentive) is the most generous of the four HMRC-approved schemes by individual limit and post-disposal tax treatment, but is restricted to SMEs only (gross assets ≤£30m, ≤250 full-time employees). Individual limit £250,000 of unexercised options. No income tax or NI on grant or exercise (assuming exercise price was at or above market value at grant). CGT on disposal at 10% Business Asset Disposal Relief rate if held 2+ years from grant and the disposal qualifies for BADR. This combination of high limit, no IT/NI on exercise, and 10% CGT is unmatched by any other UK scheme. By contrast, the most generous all-employee scheme is SIP (Share Incentive Plan) with up to £9,000/year of various share acquisitions (£1,800 partnership from gross salary + £3,600 free + 2:1 matching), full IT/NI exemption on 5-year hold. CSOP (£60,000 individual limit since April 2023, no IT on exercise after 3 years) is the best alternative to EMI for non-SME companies. SAYE (£500/month savings contract, 3 or 5 years, 20% discount option) suits all-employee participation with savings discipline.
How does SAYE compare to SIP?
SAYE (Save As You Earn / Sharesave) is a SAVINGS-CONTRACT-based scheme: employee saves £5-£500/month from net salary for 3 or 5 years, then chooses to either exercise share options at a 20% discounted price set at contract start, or take the cash back. No income tax on the option discount or exercise gain. SIP (Share Incentive Plan) is a TRUST-based scheme combining up to four types of share acquisitions: partnership shares (£1,800/year from gross salary, pre-tax-and-NI), free shares (up to £3,600/year), matching shares (2:1 from employer), dividend shares (reinvested tax-free). Full IT/NI exemption on 5-year hold. Comparison: SAYE is simpler — employee saves cash, decides at maturity. SIP is more complex but more generous — pre-tax salary purchase + free shares + matching = up to £9,000/year of share acquisition value vs SAYE's £6,000/year saving cap. SIP requires 5-year hold for full relief vs SAYE 3 years. SAYE has downside protection (walk away with savings if shares fall); SIP holds underlying shares directly (downside risk). SAYE is most popular at FTSE companies (Tesco, BT, Lloyds operate large schemes); SIP is more common at SMEs and at financial services firms where employees want larger equity exposure.
When should an employer use CSOP vs EMI?
EMI is the first choice for SMEs that qualify — gross assets ≤£30m, ≤250 FT employees, qualifying trade. EMI's £250k individual limit + 10% BADR CGT outcome is materially better than CSOP's £60k limit + 18%/24% standard CGT. So if a company qualifies for EMI, it should use EMI. CSOP is the alternative when: (1) The company is above EMI thresholds (>£30m gross assets, >250 employees) — most FTSE-listed and major private companies. (2) The company carries on an excluded trade for EMI purposes — financial services, property dealing, farming above certain size, certain hospitality. (3) The grant exceeds the £250k EMI individual cap (top-up via CSOP £60k or unapproved). (4) The award is to a non-employee (consultants, advisers) — EMI requires employment. Companies often run BOTH schemes simultaneously: EMI for early SME stage, CSOP added when growth pushes them out of EMI thresholds. Some senior executives at growth-stage companies have both £250k EMI and £60k CSOP options simultaneously = £310k of approved-scheme options, with everything above that as unapproved.
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What is Section 431 election and the 14-day deadline?
Section 431 election (under ITEPA 2003 s431) is a critical UK tax election for RESTRICTED SHARES — shares acquired under employment arrangements with restrictions on transfer, forfeiture conditions, or leaver provisions. Without a S431 election, the employee is taxed on UNRESTRICTED MARKET VALUE at acquisition (potentially reduced for restrictions) AND on subsequent uplifts when restrictions lift — phased income tax over years. With a S431 election, the employee is taxed on FULL UNRESTRICTED MARKET VALUE at acquisition (immediate, one-off), and no further income tax on later restriction lifting — any subsequent uplift falls in CGT, not IT — at lower rates. 14-DAY DEADLINE — must be made JOINTLY by employer and employee within 14 days of share acquisition. Hard statutory deadline — late elections not accepted. Common triggering events: CSOP exercise of restricted shares; EMI exercise of restricted shares; RSU vest with leaver provisions; founder-share purchase with vesting. Every employee receiving restricted shares should sign within 14 days. Missing the deadline can cost £16k+ per £100k of uplift (40% IT vs 24% CGT differential).
How are RSUs different from options?
RSUs (Restricted Stock Units) and options are fundamentally different equity instruments. OPTIONS — give the holder the RIGHT but not obligation to purchase shares at a specified EXERCISE PRICE on or after vesting. Holder must pay the exercise price to acquire shares (or use cashless exercise). Value to holder = market price MINUS exercise price. If market price < exercise price, option is worthless. RSUs — give the holder the right to RECEIVE shares on vesting at NO COST. No exercise price; no payment required. Value to holder = full market price at vesting. RSUs are guaranteed positive value (assuming non-zero share price). UK tax treatment differs sharply. OPTIONS under approved schemes (SAYE, SIP, CSOP, EMI) — favourable tax treatment as discussed. UNAPPROVED options — taxed as IT + NI on exercise gain. RSUs — taxed as IT + NI on full market value AT VEST (like a cash bonus). No UK approved-scheme equivalent exists for RSUs. Result: RSUs effectively forfeit the UK approved-scheme tax advantages. US-parented company UK subsidiaries that use global RSU plans are at a tax disadvantage relative to UK-headquartered competitors using EMI/CSOP. Some employers structure RSU-equivalents as "phantom shares" or convert to CSOP grants where eligible.
What do Good Leaver vs Bad Leaver provisions mean?
Most UK employee share schemes include LEAVER PROVISIONS determining what happens to unvested awards on departure. GOOD LEAVER — typically defined as: death, disability, redundancy, retirement at agreed age, sale of the company, mutual termination. Good leavers usually retain unvested awards (or have them accelerated to vest), can exercise options after leaving for a defined period (commonly 6-12 months), and benefit from continued favourable tax treatment. BAD LEAVER — typically defined as: voluntary resignation, dismissal for cause, gross misconduct. Bad leavers usually forfeit unvested awards entirely and may be required to sell vested shares back at acquisition cost. Intermediate Leaver — some plans define a middle category (e.g., voluntary resignation after long service) with partial retention. The Good/Bad Leaver definitions are CRITICAL contract terms — for many employees the difference between Good and Bad leaver treatment on a £200k unvested option package can be the entire £200k. Common dispute areas: definition of "Cause" (drafted broadly by employers); accelerated vesting on Change of Control; notice period treatment during garden leave/PILON; lookback periods on dismissal. Senior executives should negotiate narrower Cause definitions and explicit Change of Control acceleration.
Worked: £10k SAYE vs SIP vs CSOP vs EMI vs unapproved, share price doubles
Higher-rate (40%) employee, £10,000 of equity participation across schemes over 5 years, share price doubles from £10 to £20. SAYE: contributes £2,000/year × 5 = £10,000 saved. Option price £8 (20% discount). Exercise 1,250 shares (£10k / £8). Market value £25,000. Gain £15,000. With ISA transfer: £0 tax. Without ISA: £12,000 after £3k CGT allowance × 18% basic-CGT = £2,160. NET: £22,840 - £25,000 (less original £10k savings still returnable, so net profit £12,840 - £15k). SIP: contributes £1,800/year × 5 = £9,000 partnership from gross salary (effective net cost ~£5,220). Plus matching 2:1 = £18,000 free shares. Total ~£27,000 acquired. Hold 5y, sell at doubled value = £54,000. ISA transfer = £0 tax. Effective net cost £5,220, net profit £48,780. CSOP: £10k options at £10 exercise price, market £20 at exercise. Held 3+ years. No IT on exercise. CGT on £10k gain (£20k value - £10k exercise) at 18%-24%, less £3k allowance: ~£1,500. NET profit: £8,500. EMI: same as CSOP but with BADR if 2+ years held = CGT at 10% on £7k = £700. NET profit: £9,300. UNAPPROVED: same options. On exercise IT 40% on £10k gain = £4,000 + employee NI 2% = £200 + employer NI 13.8% = £1,380 (if passed on) = total tax £5,580. Plus subsequent appreciation taxed at CGT. NET profit: £4,420 if employer NI passed on; £5,800 if not. CONCLUSION: approved schemes deliver materially better net outcomes — SIP and SAYE for all-employee participation with substantial uplift; EMI/CSOP for selective senior grants with favourable post-exercise CGT; unapproved 1.5-3x worse than EMI/CSOP for equivalent gross.
How do mobility (international moves) affect employee share schemes?
International mobility creates complex tax treatment for share scheme participants, particularly for options granted before relocation that vest during a different residency period. General principle: UK tax applies pro-rata to the period of UK residency between grant and vest. Key scenarios: (1) UK GRANT, UK RESIDENT THROUGHOUT VEST — full UK tax treatment applies (favourable approved-scheme treatment where applicable). (2) UK GRANT, MOVED ABROAD BEFORE VEST — UK tax applies to the portion of the vesting period spent UK-resident; foreign portion may be subject to foreign tax. Double tax treaty relief usually available. (3) FOREIGN GRANT, MOVED TO UK BEFORE VEST — UK tax applies to UK-resident portion of vesting; the grant remains foreign-tax sourced for the foreign portion. (4) UK GRANT, MOVED ABROAD AFTER VEST BUT BEFORE EXERCISE — UK tax applies at exercise on the option gain attributable to UK service period. (5) RSUS WITH MOBILITY — pro-rata apportionment is standard. Foreign-tax credit available where double-taxed. (6) UK SENIOR EXECUTIVES BECOMING NON-DOM — current FIG (Foreign Income and Gains) regime since April 2025 affects how foreign-sourced equity income is taxed. (7) SCOTTISH RESIDENT — Scottish income tax rates apply if the employee is a Scottish taxpayer at the time of taxable event; this can mean 48% top rate instead of 45%. Specialist mobility tax advice essential for any significant cross-border share scheme situation — the rules are complex and material.
What is the employer cost of running each scheme?
Employer setup and ongoing costs vary materially by scheme. SAYE: setup £10k-£30k legal/administrative (more for complex multi-class), ongoing administration £5-£15/employee/year via a third-party administrator (Computershare, Equiniti, Sharescape). For 1,000 employees, ~£10k/year ongoing. SIP: more complex trust-based structure, setup £15k-£50k legal, ongoing £8-£20/employee/year administration. Trust must be UK-tax-resident, audited annually. CSOP: setup £5k-£15k legal (simpler than SAYE/SIP since no trust required), ongoing £100-£500/employee/year for the documentation and HMRC filings. EMI: setup very light (£2k-£5k legal), ongoing £100-£300/employee/year. EMI annual return to HMRC is short. Critical EMI step: valuation report at grant date (Big-4 firm £5k-£15k) — recommended though not legally required, protects against HMRC challenge to grant-date market value. UNAPPROVED: very low setup cost (£1k-£3k legal), but employer carries 13.8% employer NI on exercise gain which can dwarf scheme admin (a £1m exercise gain = £138k employer NI). NIC joint-elections to shift employer NI to employees mitigate this but require careful drafting. ALL schemes require annual HMRC ERS (Employment Related Securities) return — even nil returns where no activity. Late filing £100/scheme/return.
How do US-parented company employees navigate UK tax on RSUs and options?
US-parented company UK subsidiaries (Google UK, Meta UK, Microsoft UK, Amazon UK, Salesforce UK) typically use a single GLOBAL equity plan covering all employees worldwide. The plan is usually a US-style framework with RSUs (most common) or NSOs (non-qualified stock options) for senior staff. UK-specific challenges: (1) RSUs taxed as IT + NI at vest on full market value — no UK approved-scheme equivalent, so UK employees lose the SIP/SAYE/EMI tax advantage. (2) US sell-to-cover withholding may not align with UK tax rates — UK employees may face balancing payment in SA. (3) US ISO (Incentive Stock Option) treatment does not flow through to UK — UK treats as unapproved. (4) Some plans permit UK-specific sub-plans aligned to CSOP — this is rare but valuable when offered. (5) Section 431 election within 14 days of restricted-share vest is critical and often missed by US-administered plans. (6) UK tax events on RSU vest in calendar year 1 + sale in calendar year 2 require both years on SA. Practical advice: UK employees of US-parented companies should engage a UK tax adviser experienced in employee equity at offer stage. Common issues to clarify before accepting: whether the company will operate a UK CSOP sub-plan; whether Section 431 elections are completed automatically; how withholding is calibrated to UK rates; how US-UK tax treaty applies if you ever relocate. Specialist advice typically costs £500-£2,000/year but commonly saves £5k-£50k vs DIY mistakes.
Disclaimer: Employee share scheme limits, tax treatment and Section 431 deadlines reflect 2025/26 legislation as of May 2026. Material packages should be modelled with a tax adviser specialising in employee equity. See gov.uk/tax-employee-share-schemes for current policy.