- Save as you earn – SAYE
- Company share option plan – CSOP
- Enterprise management incentives – EMI
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During your employment, there may be a point in time when your employer wishes to reward you. This could come in the form of remuneration, benefits in kind, but could also be in the form of some shares or share option. The treatment of these options should be considered carefully. For more detailed analysis of what is being offered and the tax implications, it is recommended you seek guidance from chartered tax advisors. In the UK, there are two categories of share schemes that may be operated. These are unapproved and approved (this meaning that the scheme has been approved by HMRC). Although there will be more detailed descriptions below, the approved route provides more tax benefits relative to the unapproved scheme, although unapproved options offer greater flexibility to employers. Unapproved Share Schemes When an employer grants an employee an option, it will usually be at a value less than the current market value. This immediately gives rise to a taxable benefit and it is the difference between the market value and the price the options are granted that the employee will have to pay income tax on. This income tax charge will become chargeable on the employee at the date of acquisition (for shares) and date of exercise (for share options). When these shares are disposed of, if sold at a profit, then a chargeable gain will arise. This will be calculated as the price the shares are sold for less the price paid plus any amounts previously subject to income tax. The capital gains tax rate will be either 18% or 28%. Approved share schemes The major benefit of your employer granting a share/option as an approved share scheme is that these have major tax benefits. There are two major types of approved share schemes being: - Free Share Schemes – Share Incentive Plans (SIP) - Share option schemes
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