United Kingdom
Employee Equity in the United Kingdom
The UK has one of the most developed tax-advantaged option regimes in Europe. Most private UK startups use the Enterprise Management Incentive (EMI) scheme where they qualify, fall back to unapproved options or a Company Share Option Plan (CSOP) where they do not, and use growth shares for founders or senior hires who want direct equity without a large upfront tax charge.
UK share scheme guides including EMI
Employee Equity
UK companies choose between EMI options, CSOP options, unapproved options and growth shares depending on company size, sector and headcount. EMI is the default for qualifying startups because of its tax advantages, with CSOP and unapproved options as fallbacks.
Share Options
A UK share option gives an employee the right to buy shares at a fixed strike price after vesting. Whether the eventual gain is taxed as income or capital depends entirely on which scheme the option was granted under.
EMI Options
EMI is the UK's flagship tax-advantaged option scheme for small and medium sized companies. Qualifying employees pay no income tax or National Insurance at exercise if the strike price was set at or above the HMRC agreed value, and can benefit from Business Asset Disposal Relief on sale.
CSOP
CSOP is a tax-advantaged option scheme available to a wider range of companies than EMI, including larger private companies and those in excluded EMI trades. Since April 2023 the individual limit doubled and the requirement for a restricted share class was removed, making CSOP a realistic option for more startups.
Growth Shares
Growth shares are a separate class of real shares that only participate in value created above a set hurdle. They let senior hires or advisers acquire actual equity at a low upfront cost without a large income tax charge at acquisition.
Equity Tax
UK employee equity can be taxed as income, subject to National Insurance, or taxed as a capital gain, depending on the instrument and scheme used. Companies operating any option or share plan must also file an annual ERS return with HMRC by 6 July.
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