How employment related securities work if you're an employer
Use employment related securities (ERS) to reward, retain or give incentives to your employees, including any tax advantages.
- From:
- HM Revenue & Customs
- Published
- 10 October 2024
- Last updated
- 28 November 2025 — See all updates
As an employer you can offer employment related securities (ERS) such as shares in your company to reward, retain or provide incentives to your employees.
You can run more than one scheme at the same time and you can offer a mix of both tax advantaged and non-tax advantaged schemes.
The most common types are:
- share options — the right to buy a certain number of shares at a fixed price, sometime in the future, within your company
- share awards — giving your employees actual shares rather than share options, free or for less than their market value
You can offer these as either a formal scheme or plan or as an informal scheme with one-off awards of shares or grants of options.
Before you start
You should:
Find out more about how the different schemes work.
Decideifyouneedtoauthoriseanagenttoregisterandreportonyourbehalf.Register the scheme with HMRC.
Start submitting ERS returns
—by 6 July following the end of the tax year.
If you ask an agent to manage your ERS scheme,returns, you’llthey needmust tocomplete authorisethe themOnline ifAgent youAuthorisation wantprocess. themFind out how to submituse an ERS returnthe onOnline yourAgent behalfAuthorisation to get authorised as a tax agent.
You must submit an ERS return online every year for all schemes, including one-off awards or gifts of shares. If there are no reportable events, you will need to submit a nil return. Reportable events can include the grant and exercise of share options, award of shares, and other securities to UK employees or directors, through to awards of carried interest. You may need to report changes in rights associated to the securities, or off-market transactions.
How tax-advantaged share schemes work
If you offer your employees company shares or the option to buy shares through a tax-advantaged share scheme, they may not have to pay Income Tax or National Insurance on the gain when they get the shares.
There are 4 tax-advantaged share schemes (TASS):
- Share Incentive Plans (SIP)
- Save As You Earn (SAYE)
- Company Share Option Schemes (CSOP)
- Enterprise Management Schemes (EMI)
You might be able to claim a Corporation Tax deduction for the costs of setting up and running a share scheme, as well as for the cost of providing the shares.
Share Incentive Plans (SIP )
This is a tax-advantaged plan for all employees. You can:
- award shares to employees in flexible ways
- encourage employees to save regularly and buy shares in your company
TheyYour employees will not pay Income Tax or National Insurance on the value of their shares if they keep them in the plan for 5 years. YourThey employees will pay Income Tax and National Insurance on the value of any shares they take out early.
There are 4 share types you can offer employees:
- free shares
- partnership shares
- matching shares
- dividend shares
Find out more about these types of shares.
Save As You Earn (SAYE)
Save As You Earn is a tax-advantaged plan for all employees so that employees can buy shares with their savings for a fixed price.
You can give your employees the choice to buy share options in either 3 or 5 years time, at either:
atat
Your employees must agree to a special savings contract to buy the shares at the end of a fixed term with regular weekly or monthly savings.
The maximum amount an employee can save is £500 per month out of net pay. pay.
You can offer share options under their savings-related schemes every yearyear, so itit’s is possible for an employee to get shares each year without any Income Tax or National Insurance arising.
Employees will also not pay Income Tax or National Insurance on the difference between what they pay for the shares and what their shares are worth.
Company Share Option Plans (CSOP)
This is a tax advantaged, discretionary share option plan. As an employer you can decide who to grant options to. If you give eligible employees a share option, so they can buy a number of company shares at a chosen time and price, the price must not be less than the market value at the time.
From 6 April 2023 each employee can only be given up to £60,000 of options. This is £30,000 for options granted before 6 April 2023.
Your employee does not need to pay Income Tax or National Insurance on any gain when acquiring the shares if the option is exercised, that is, the employee acquires the shares between 3 and 10 years after the option was granted.
If employment ends in certain circumstances, it may be possible for the individual to exercise options within 6 months of the employment ending, in which case no Income Tax or National Insurance will need to be paid on any gain made. This depends on the terms of the option.
If the individual has died before exercising the option, it may be possible for their personal representative to exercise the option without paying Income Tax or National Insurance, provided this is within 12 months of the death. This also depends on the terms of the option.
Enterprise Management Incentives (EMI)
Enterprise Management Incentives is a tax advantaged share scheme. Your company may be eligible if it has:
- gross assets of £30 million or less
- fewer than 250 full-time employees
Your employees are eligible if they are required to work at least 25 hours a week (or if less, 75% of their total working time).
You can grant share options up to the value of £250,000 to each employee and the total value of options that can be granted under Enterprise Management Incentives is £3 million.
When to tell HMRC
You must tell HMRC about a grant of an Enterprise Management Incentives option:
- within 92 days of the date of
grantgrant,— - before 6 July following the end of the tax year in which the grant is
mademade,—
If you fail to notify HMRC within these deadlines, you risk losing any tax benefits for you and your employees.
You can grant these options without any Income Tax or National Insurance Contributions due if your employee:
- bought the shares at a price at least equal to the market value they had on the day the option was granted
- takes their options out of the scheme within ten years of the date of grant and has no disqualifying event
A disqualifying event can include:
- a company reorganisation can be a disqualifying event unless qualifying replacement options are granted
- a company no longer meeting the trading activities requirement
- an employee no longer meeting the employment requirement or stops being employed by the company
- changes to the terms of the option
- changes to the share capital of the company
- a conversion of shares
- a grant of a schedule 4 Company Share Option Plan option that takes the option holder over the £250,000 limit
If the Enterprise Management Incentives option is:
- taken out of the scheme within 90 days of the disqualifying event, the tax advantages are preserved
- not taken out within 90
daysdays, then there will be a tax charge on exercise
Companies that cannot offer Enterprise Management Incentives
Companies that work in ‘excluded activities’ are not allowed to offer Enterprise Management Incentives, these include:
- banking
- farming
- property development
- provision of legal services
- ship building
You can check the full list of excluded activities.
How non-tax advantaged schemes work
Non-Tax Advantaged Share Schemes (Non-TASS) are schemes that do not provide income tax advantages.
These schemes are:
- used by companies to reward any individual or group of employees and directors
- are not limited by the same rules as the tax advantaged schemes
There are 2 main types of non-tax advantaged schemes:
- acquisition schemes — where employees buy shares in their employer for full market value or are awarded those shares for free or at a discount
- share option schemes — where employees are granted options to buy shares in their employer
You must operate PAYE and account for Income Tax and National Insurance contributions (both employees’ and employers’) on any gain when:
- the shares that are readily convertible assets are acquired by an individual
- the right or opportunity to make the acquisition is available by reason of employment
Where shares are not readily convertible assets, your employee does not need to pay National Insurance contributions, but they would have to pay Income Tax on any gain through self-assessment.
Your employee might have to pay Capital Gains Tax if the shares are sold.
You may be able to get a deduction for Corporation Tax on the cost of setting up and running a scheme and the cost providing shares.
Paying Capital Gains Tax
For the following schemes, if the shares are sold, your employee might have to pay Capital Gains Tax:
- Enterprise Management Incentives (EMI)
- Company Share Option Plan (CSOP)
For Save As You Earn (SAYE) schemes your employees may have to pay Capital Gains Tax if:
- they sell their shares
- the shares go up in value between when they buy them and when they transfer them
Your employees do not pay Capital Gains Tax when they transfer:
- to an Individual Savings Account (ISA)
—within 90 days of the scheme ending - to a pension directly from the scheme when it ends — if they do not transfer their shares immediately, they can still transfer them up to 90 days later
Find out more information about Capital Gains Tax on the sale of shares from a Save As You Earn scheme.
For Share Incentive Plans (SIP) your employees will pay Capital Gains Tax on shares if they:
- take shares out of the plan and keep them to sell later and their value has increased
- do not immediately transfer those shares to a pension when the scheme ends, and the share value has increased during that time
Your employees will not pay Capital Gains Tax on shares that are:
- sold — if they are kept in the plan up until the point of sale
- transferred to an Individual Savings Account (ISA)
—within 90 days of the scheme ending - immediately transferred to a
pensionpension,—
More information
You can contact HMRC if you have more questions about the schemes availableavailable.
You or you can also email shareschemes@hmrc.gov.uk.
Employment Relatedrelated Securitiessecurities schemes can be complicated. To ensuremake sure you operate a fully compliant share scheme, you could take the following additional steps:
- read the technical
manualsmanual - keep up to date with the latest HMRC bulletins
- consider taking professional advice from an agent
Updates to this page
-
The section 'Before you start' has been updated with information on how to authorise an agent to manage your employment related securities (ERS) returns.
-
First published.