Growth Shares Scheme Tax Calculator

Growth shares (or 'hurdle shares') are a class of shares that only participate in a company's value above a set hurdle price. They are commonly used to give employees a share in future growth without handing over existing value.

If the Actual Market Value (AMV) of the growth shares at grant exceeds the price paid, the discount is taxable as employment income. The key advantage is that the hurdle means AMV is often very low or nil, minimising income tax at grant.

HMRC allows the AMV of growth shares to be negotiated and agreed with their Shares and Assets Valuation team. The hurdle means AMV is typically significantly below the Unrestricted Market Value (UMV), sometimes as low as 5-10% of UMV.

Assuming the income tax charge at grant was minimal or nil, the full gain on sale (proceeds minus base cost, which is AMV at grant) is subject to CGT at 18-24%, or 10% if Business Asset Disposal Relief (BADR) applies.

Growth shares can qualify for BADR if: the company is a trading company, the employee holds at least 5% of ordinary shares OR the shares were acquired via EMI, and they have held them for 2+ years. The 5% threshold is often difficult to meet — EMI is usually more straightforward for BADR.

EMI options have a statutory income tax exemption at grant if granted at or above AMV and are often more straightforward. Growth shares are shares (not options), so there is no exercise event; they suit situations where the EMI limit (£250k per employee) is exceeded or when the company doesn't qualify for EMI.

Yes. The grant of growth shares must be reported on a Form 42 (Employment Related Securities return) by 6 July following the tax year of grant. Failure to file results in penalties.

Some companies issue growth shares that convert to ordinary shares on exit. The conversion itself can trigger income tax if not properly structured. Legal advice is essential to ensure conversion is treated as a CGT event (not income) on disposal.