CSOP Calculator UK 2025/26

CSOP vs Unapproved Options — Tax on £50,000 Gain (2025/26)

Based on higher-rate taxpayer (40% IT, 2% NI). CGT at 24%. Annual CGT exemption £3,000 applied to CSOP.

CSOP (Company Share Option Plan) — Complete UK Guide

What Is a CSOP?

A Company Share Option Plan (CSOP) is an HMRC-approved discretionary share option scheme. It allows companies to grant selected employees and directors the right to buy shares at a fixed price on a future date, with no income tax or National Insurance due on exercise — provided qualifying conditions are met. Only Capital Gains Tax applies when shares are eventually sold.

CSOPs were significantly reformed from April 2023. The most important change was the doubling of the individual exercise limit from £30,000 to £60,000. Additionally, the requirement that employee shares must be "fully paid up, non-redeemable ordinary shares" was relaxed to allow certain restricted shares and shares subject to drag-along provisions — making CSOPs practical for more private company structures.

CSOP vs EMI: Which Should Your Company Use?

The choice between CSOP and EMI depends primarily on whether the company meets EMI qualifying conditions:

Use EMI if: Your company is independent, has fewer than 250 employees, gross assets under £30 million, and carries on a qualifying trade. EMI delivers a 10% CGT rate via BADR, a £250,000 per-employee limit, and is generally the gold standard for startup equity.

Use CSOP if: Your company is too large for EMI, is a subsidiary of a larger group, operates in an excluded trade (financial services, property investment, legal/accountancy), or is listed on a stock exchange. CSOP delivers 18%/24% CGT (no BADR), a £60,000 per-employee limit, and works for any company structure. For large employers wanting to reward key managers with a tax-efficient equity incentive, CSOP is the most suitable approved scheme.

Some companies use both: EMI for early-stage employees who joined when the company was small, and CSOP for new hires once the company has grown beyond EMI qualifying thresholds. This dual approach is fully permitted under HMRC rules.

CSOP Qualifying Conditions — Company

Unlike EMI, CSOP has very few company-level restrictions. The main requirements are:

• Shares must be ordinary shares in a company that is either listed on a recognised stock exchange or is an independent company (not a 51% subsidiary of a non-qualifying company, in the context of employee ownership).
• Shares must meet qualifying conditions: They must be fully paid up, non-redeemable, and not subject to restrictions other than those permitted under Schedule 4 ITEPA 2003. The April 2023 reforms broadened this to allow certain drag-along provisions.
• There is no restriction on company size, gross assets, employee headcount, or trade type.

CSOP Qualifying Conditions — Employee

Any employee or full-time director of a qualifying company can receive CSOP options. The scheme is discretionary — the company selects who receives options. There are no working time requirements (unlike EMI's 25-hour rule). There is no restriction on employees who already hold a material interest in the company (unlike EMI's 30% rule). The exercise price must be at least equal to the market value of the shares at the date of grant.

The £60,000 CSOP Exercise Limit (From April 2023)

The individual annual exercise limit is £60,000, measured as the total market value of shares subject to unexercised options at the time of each grant. This limit applies to options granted after 6 April 2023. Options granted before this date retain the previous £30,000 limit. The doubling of the limit in 2023 was a key Budget reform designed to make CSOPs more competitive and attractive for mid-market companies seeking to bridge the gap between EMI and full unapproved options.

There is no company-level cap — a company with 100 eligible employees could grant up to £6 million in CSOP options in aggregate, provided each individual does not exceed £60,000.

The 3-Year Minimum Exercise Period

CSOP options must be held for a minimum of 3 years before exercise to benefit from the CGT-only treatment. If options are exercised before 3 years, income tax and NI apply on the exercise gain as if they were unapproved options. The 3-year clock runs from the grant date. Exceptions to the 3-year rule exist for: death of the option holder (options can be exercised by the estate); company takeover or reconstruction (options can be exercised within 6 months of the event); and redundancy or injury/disability of the employee.

What Happens to CSOP Options When You Leave?

Unlike EMI (which provides a 90-day exercise window on leaving), CSOP options lapse when employment ends unless the option agreement includes "good leaver" provisions. The option agreement is the controlling document. Well-drafted CSOP schemes typically allow good leavers (redundancy, retirement, ill health) to exercise their vested options for a period after leaving — often 6 months. Bad leavers (resignation or dismissal) may lose all unvested and sometimes vested options. Because CSOP is a company-specific document, terms vary significantly between employers.

HMRC Registration — 92-Day Notification Requirement

CSOP schemes must be registered with HMRC and the initial grant must be notified within 92 days of the date of first grant. This is done via HMRC's Employment Related Securities (ERS) online service. Unlike EMI, there is no pre-approval process for CSOP — companies register and self-certify that their scheme meets the Schedule 4 ITEPA 2003 requirements. Failure to register within 92 days causes the options to be treated as unapproved options, losing all CGT-only benefits. HMRC takes a strict view on this deadline.

CSOP for Private Companies Approaching an IPO

CSOP is particularly attractive for private companies that have outgrown EMI and are approaching an IPO or trade sale within 3–5 years. The key planning point is to grant CSOP options now (when the share price is lower), start the 3-year clock, and allow employees to exercise at the IPO or shortly after — paying only CGT on the gain rather than income tax. For a senior employee receiving CSOP options on £60,000 of shares today that are worth £300,000 at IPO, the CGT saving versus unapproved options could exceed £70,000.

Annual ERS Return Filing

Once a CSOP scheme is registered with HMRC, the company must file an annual Employment Related Securities (ERS) return by 6 July following the end of each tax year. This return discloses all grants, exercises, lapses, and modifications during the year. Failure to file on time results in penalties: £100 for the first day late, increasing to £200 after 3 months, and further tax-geared penalties after 6 months. The annual return obligation continues even in years where there is no activity in the scheme.