Tax Guide · 2026/27
UK Employee Share Schemes Guide 2026/27— EMI, SAYE, CSOP and SIP Explained
Employee share schemes are among the most powerful tax planning tools available to UK employees and business owners. Done correctly, they allow significant equity to be transferred with minimal Income Tax and National Insurance. This guide explains all four HMRC-approved schemes — EMI, SAYE, CSOP and SIP — covering who qualifies, the limits, and exactly how the tax treatment works in 2026/27.
Overview: The Four HMRC-Approved Schemes
HMRC approves four tax-advantaged employee share schemes. Each targets different situations:
| Scheme | Best for | Key limit | Income tax on exercise |
|---|---|---|---|
| EMI | Small/medium trading companies (<250 employees, <£30m assets) | £250,000 per employee | Nil (if conditions met) |
| SAYE | All employees (any company size) | £500/month saving | Nil on discount |
| CSOP | Companies too large for EMI | £60,000 per employee | Nil (if conditions met) |
| SIP | All-employee plan (any size) | £3,600 free shares/year | Nil after holding period |
EMI (Enterprise Management Incentives)
EMI is widely regarded as the most generous employee share option scheme in the world. It is specifically designed to help small, fast-growing UK companies attract and retain key talent by allowing them to offer significant equity with minimal tax consequences.
Company qualifying conditions
- UK-incorporated or with a UK permanent establishment
- Independent (not majority-owned by another company)
- Carrying on a qualifying trade (not property letting, financial activities, legal services, etc.)
- Gross assets under £30 million
- Fewer than 250 full-time equivalent employees
Employee qualifying conditions
- Must be an employee (not just a consultant) of the company or a qualifying subsidiary
- Must work at least 25 hours per week, or at least 75% of their total working time, for the company
- Must not hold more than 30% of the company's share capital
Tax treatment
Provided options are granted at (or above) the agreed market value (set with HMRC's Shares and Assets Valuation team), there is no Income Tax or NI on grant or exercise. The entire economic gain from grant to exercise is treated as a capital gain on disposal.
If the employee has held options for at least 2 years and meets the Business Asset Disposal Relief conditions, the gain on sale is taxed at just 14%(rising to 18% from April 2026) up to the £1 million lifetime limit.
Example:A startup grants EMI options over 10,000 shares at a 10p exercise price. 4 years later, the company sells for £5 per share. Employee exercises and sells simultaneously. Gain = (£5 − £0.10) × 10,000 = £49,000. With BADR, CGT at 14% = £6,860. Without EMI, this gain could easily attract 40%+ Income Tax and NI totalling over £20,000.
SAYE (Save As You Earn / Sharesave)
SAYE is an all-employee scheme with a uniquely low-risk structure: if the share price falls, employees simply take back their savings. If it rises, they buy shares at the discounted option price and profit from the increase.
How it works
- Employee commits to saving £5 to £500 per month (from net pay) into a HMRC-approved savings account
- Saving period is either 3 years or 5 years
- The option price is set at the start, at up to 20% below market value
- At the end of the saving period, employee can use savings to buy shares at the option price
- If share price has fallen, they take back the cash instead (no loss)
There is no Income Tax or NIon the discount granted at the start, nor on the gain made at exercise. The scheme is open to all employees who have met any qualifying period set by the company (maximum 5 years' service).
After exercising, employees can transfer shares into an ISA within 90 daysto shelter future growth from CGT. This makes SAYE particularly powerful when combined with an ISA subscription.
CSOP (Company Share Option Plan)
CSOP allows companies to grant options over shares worth up to £60,000 at market value(at date of grant) per employee. This limit was doubled from £30,000 in April 2023. CSOP is available to any UK company, including large listed companies that do not meet EMI criteria.
Conditions for tax-free exercise
- Options must be granted at market value at date of grant
- Options must be exercised between 3 and 10 years after grant
- The company must be a qualifying company at grant and exercise dates
- The employee must not hold more than 30% of shares
If these conditions are met, there is no Income Tax or NI on exercise. CGT applies on the gain between exercise price and sale price. If BADR conditions are met, the 14%–18% rate may apply.
CSOP is particularly useful for companies too large for EMI (e.g. those with over 250 employees or over £30 million in gross assets) and for listed companieswanting to incentivise senior employees without unapproved options.
SIP (Share Incentive Plan)
A Share Incentive Plan is the most flexible all-employee scheme. It has four separate components that companies can mix and match:
| Component | Annual limit | Tax-free after |
|---|---|---|
| Free shares (employer grants) | £3,600 per employee | 5 years |
| Partnership shares (employee buys from gross salary) | £1,800 or 10% of salary (lower of) | Immediately (bought pre-tax) |
| Matching shares (employer match to partnership) | Up to 2 per partnership share | 3 years |
| Dividend shares (reinvested dividends) | No cap (reinvested from dividends) | 3 years |
Partnership shares are particularly powerful because they are purchased from grosssalary before Income Tax and NI, effectively giving immediate tax relief at the employee's marginal rate. A 40% taxpayer buying £1,800 of partnership shares saves £720 in Income Tax plus NI.
When leaving the company, employees can transfer SIP shares to an ISA within 90 dayswithout paying Income Tax on the value at that point. This is the most useful ISA-transfer right in the four schemes.
Unapproved Share Options
Companies can also grant share options outside any HMRC-approved scheme — these are called "unapproved" or "non-qualifying" options. There is no limit on the value, but:
- Income Tax and NI apply on the entire spread (market value at exercise minus option price) at exercise
- The employer must operate PAYE on the benefit at exercise
- CGT applies on any further gain between exercise and sale
Unapproved options are sometimes used for employees who do not meet EMI conditions (e.g. non-UK employees, those working less than 25 hours) or for option pools that exceed EMI limits.