How employment related securities work if you're an employer

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:

1. Find out more about how the different schemes work.

2. Register the scheme with HMRC.

3. Start submitting ERS returns by 6 July following the end of the tax year.

If you ask an agent to manage your ERS returns, they must complete the Online Agent Authorisation process. Find out how to use the Online Agent Authorisation 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)(SIP)
• Save As You Earn (SAYE)(SAYE)
• Company Share Option Schemes (CSOP)(CSOP)
• Enterprise Management Schemes (EMI)(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 foran theadditional costdeduction ofwhen providing the shares.shares are provided.

Share Incentive Plans (SIP )(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

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)(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:

• the market value on the date of grant
• a discount of up to 20% of that market value

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.

You can offer share options under their savings-related schemes every year, so it’s 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)(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.

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)(EMI)

An Enterprise Management IncentivesIncentive (EMI) is a tax advantaged share scheme.

Most Yourcompanies company may be eligible to operate an EMI scheme if itthey has:have:

• gross assets of £120 million or less 
• fewer than 500 full-time employees
• a total value of unexercised options granted under EMI not exceeding £6 million

On or before 5 April 2026, companies may have been eligible to operate an EMI scheme if they had:

• gross assets of £30 million or less
• fewer than 250 full-time employees
• a total value of unexercised options granted under EMI not exceeding £3 million

For companies where the increased limits apply, the limit on the exercise period has increased from 10 years to 15 years for all options that have not already lapsed, expired or been exercised. The company will retain the tax advantages if the contracts are amended in line with the option agreement or legislation, where required.

The option must be exercised on or after 6 April 2026 to take advantage of the increased holding period.

The increase in the eligibility criteria and extended holding period will not apply if the employer company has its registered office in Northern Ireland and trades in goods or the provision of electricity.

Read section ETASSUM50500 of the Employee Tax Advantaged Share Scheme User Manual for more information on the EMI limits and exercise period changes.

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.employee.

When to tell HMRC

You must tell HMRC about a grant of an EnterpriseEMIs Management Incentives option:

• within 92 days of the date of grant, if the option was granted before 6 April 2024
• before 6 July following the end of the tax year in which the grant is made, if the option was granted on or after 6 April 2024

You can grant these options without any Income Tax or National Insurance Contributionscontributions 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 EnterpriseEMI 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 days, 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 EnterpriseEMIs, 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-TaxNon-tax Advantagedadvantaged Shareshare Schemesschemes (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 andas well as an additional deduction when the costshares providingare shares.provided.

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)EMI
• Company Share Option Plan (CSOP)CSOP

For SaveSAYE 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)(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 ShareSIP 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)(ISA) within 90 days of the scheme ending
• immediately transferred to a pension, directly from the scheme when it ends

More information

You can can contact HMRC if if you have more questions about the schemes available.

You can also email email shareschemes@hmrc.gov.uk. 

Employment related securities schemes can be complicated. To make sure you operate a fully compliant share scheme, you could take the following additional steps: 

• read about share schemes in the technical manual
• read about employee tax advantaged share schemes in the technical manual
• read about Corporation Tax deductions in the business income manual
• keep up to date with the latest HMRC bulletins
• consider taking professional advice from an agent