What are the main UK employee share schemes?

The four HMRC-approved employee share schemes are: SIP (Share Incentive Plan) — buy or receive free shares with tax and NI advantages. SAYE (Save As You Earn / Sharesave) — save a fixed amount monthly and use it to buy shares at a discounted price after 3 or 5 years. EMI (Enterprise Management Incentive) — share options for employees of small, high-growth companies with very generous tax treatment. CSOP (Company Share Option Plan) — share options to buy up to £60,000 of shares at a fixed price. Each has different tax advantages, eligibility rules, and limits.

Do I pay tax on employee shares?

It depends on the scheme. With HMRC-approved schemes, you get significant tax advantages: SIP shares held for 5+ years are completely free of income tax and NI. SAYE shares are free of income tax (CGT may still apply on gains above the annual exempt amount). EMI options can be taxed entirely at CGT rates (as low as 10% with Business Asset Disposal Relief). CSOP options avoid income tax on the gain up to the exercise price. Without an approved scheme, shares or options are generally taxed as employment income (income tax + NI), which is much more expensive.

What is SAYE (Sharesave)?

SAYE (Save As You Earn), also called Sharesave, lets you save £5–£500 per month from your salary for 3 or 5 years. At the end, you can use your savings to buy company shares at a price fixed at the start — typically at a 20% discount to the market price when the scheme was offered. If the share price has risen, you benefit from both the discount and the growth. If the price has fallen below your option price, you can just take your savings back in cash. There's no income tax or NI on the discount or gain — only CGT if you sell at a profit above the annual exempt amount.

What is an EMI share option?

EMI (Enterprise Management Incentive) options are share options for employees of smaller companies (gross assets under £30 million, fewer than 250 employees). They're considered the most generous UK share scheme. The company grants you the option to buy shares at a fixed price. When you exercise the option, there's no income tax or NI on the gain (as long as the option price was set at market value). When you sell, you pay CGT — potentially at just 10% with Business Asset Disposal Relief. Companies can grant EMI options over shares worth up to £250,000 per employee.

Employee Share Schemes Guide UK — SIP, SAYE, EMI & CSOP Explained | PocketWise

Employee share schemes give you a stake in the company you work for — often with significant tax breaks. Here’s how the main UK schemes work.

The Four HMRC-Approved Schemes at a Glance

Scheme	Type	Tax advantage	Annual/total limit	Best for
SIP (Share Incentive Plan)	Buy/receive shares	No income tax or NI if held 5+ years	£1,800/year (partnership) + £3,600 (free/matching)	Large employers, all employees
SAYE (Save As You Earn / Sharesave)	Save and buy at discount	No income tax or NI on discount/gain	Save £5–£500/month	Large employers, all employees
EMI (Enterprise Management Incentive)	Share options	No income tax, CGT only (potentially 10%)	Options over £250,000 of shares	Small companies (under 250 employees)
CSOP (Company Share Option Plan)	Share options	No income tax on gain up to exercise price	Options over £60,000 of shares	Any size company

Feature	Detail
Who can participate	All UK employees (company must offer to all, with some conditions)
Free shares	Company gives you up to £3,600/year of shares for free
Partnership shares	You buy up to £1,800/year from pre-tax salary
Matching shares	Company matches partnership shares up to 2:1
Dividend shares	Reinvest dividends in more shares (up to £1,800/year)
Tax treatment (held 5+ years)	No income tax, no NI on value of shares
Tax treatment (held 3–5 years)	Income tax and NI on initial value only
Tax treatment (held under 3 years)	Income tax and NI on market value at withdrawal
CGT	Only on gains above annual exempt amount when you sell

SIP — Example

Year 1	Amount
Free shares (from employer)	£3,600
Partnership shares (you buy, pre-tax)	£1,800
Matching shares (2:1 match)	£3,600
Total shares received	£9,000
Tax if held 5+ years	£0 (income tax and NI)

SAYE (Save As You Earn / Sharesave)

Feature	Detail
How it works	Save £5–£500/month for 3 or 5 years
Exercise price	Fixed at start — usually a 20% discount to market price
At maturity	Choose to buy shares at the discounted price OR take cash savings back
Income tax on discount/gain	None
NI on discount/gain	None
CGT when you sell	Normal CGT rules — 18% (basic rate) or 24% (higher rate), minus annual exempt amount
If share price falls below option price	Just take your cash back — no obligation to buy

SAYE — Example

Feature	Amount
Monthly saving	£200
Period	3 years
Total saved	£7,200
Share price at start	£10
Exercise price (20% discount)	£8
Share price at maturity	£14
Shares you can buy	7,200 ÷ 8 = 900 shares
Market value of shares	900 × £14 = £12,600
Profit	£12,600 − £7,200 = £5,400
Income tax + NI	£0
CGT (if you sell immediately)	On £5,400 gain minus £3,000 annual exempt amount = £2,400 taxable

EMI (Enterprise Management Incentive)

Feature	Detail
Who can participate	Employees of qualifying small companies
Company requirements	Gross assets under £30 million, fewer than 250 employees, trading company
Employee requirements	Work at least 25 hours/week (or 75% of working time) for the company
Option limit	Up to £250,000 per employee
Company limit	£3 million total EMI options outstanding
Exercise price	Usually set at market value (agreed with HMRC)
Income tax on exercise	None (if option price = market value at grant)
NI on exercise	None
CGT on sale	Yes — but 10% with BADR (Business Asset Disposal Relief, up to £1 million lifetime)
Holding period	Options must be exercised within 10 years

EMI — Example

Feature	Amount
Option grant	10,000 shares at £2 each
Total option value	£20,000
Share price at exercise (3 years later)	£10
Value of shares at exercise	£100,000
Income tax + NI at exercise	£0
You sell for	£100,000
Gain	£100,000 − £20,000 = £80,000
CGT at 10% (with BADR)	£8,000

Without EMI, the £80,000 gain would be taxed as employment income at up to 45% + NI = potentially £40,000+ tax.

Feature	Detail
Who can participate	Selected employees (doesn’t have to be offered to all)
Company requirements	Any UK company (no size limit)
Option limit	Up to £60,000 per employee (increased from £30,000 in 2023)
Exercise price	At least market value at grant
Holding period	Must hold options for at least 3 years before exercising
Income tax on exercise (after 3 years)	None on the gain
NI on exercise	None
CGT on sale	Normal CGT rates on gain above exercise price

Comparing the Schemes

Feature	SIP	SAYE	EMI	CSOP
Tax-free income tax?	Yes (5yr+)	Yes	Yes	Yes (3yr+)
NI saving	Yes (5yr+)	Yes	Yes	Yes (3yr+)
CGT applies on sale	Yes	Yes	Yes (10% with BADR)	Yes
Must offer to all?	Yes	Yes	No	No
Company size limit	None	None	Under 250 employees	None
Max benefit per year	~£9,000	~£6,000	£250,000 (total)	£60,000 (total)

Tax Summary

Event	SIP (5yr+)	SAYE	EMI	CSOP (3yr+)
Acquiring shares	No IT, no NI	No IT, no NI	No IT, no NI	No IT, no NI
Selling shares	CGT on growth since acquisition	CGT on growth since option price	CGT at 10% (BADR)	CGT on growth since exercise price

Should You Participate?

Consideration	Detail
It’s almost always worth it for SAYE	Worst case: you get your savings back. Best case: significant tax-free gain
Free shares (SIP)	Always accept free shares — it’s free money
Partnership shares (SIP)	Good deal if you can afford to lock up the money for 5 years
EMI	Extremely tax-efficient — participate if you believe in the company’s growth
Concentration risk	Don’t put all your savings in your employer’s shares — if the company struggles, you could lose your job AND your investments
Diversify	Consider selling shares after any holding periods and reinvesting in a diversified portfolio

Employee Share Schemes Guide UK — SIP, SAYE, EMI & CSOP Explained

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