In this case, the liability is paid to your employer and all of the shares within the company are retained by you. Buy the shares outright and pay the tax and NI charge in full.Normal capital gains tax rules apply on the sale and you will pay tax at any gain above the annual exemption at either 18% or 28% depending upon your income elsewhere.Īt the point of exercise, there are usually three options available as follows: This “income” counts toward the £100,000/£60,000 limits for personal allowance & child benefit restrictions.Īs and when the shares are sold, the base cost for capital gains tax purposes is the market value at the date of exercise. The difference between these numbers is subject to tax and NI at your marginal rate and your employer will complete the calculation and make the deduction via the payroll in the month the shares are exercised. This charge is calculated by reference to the market value of the shares at the time of exercise less the amount due to be paid for the shares. When the option is granted, under most schemes there are no initial tax implications.Īt the point that the shares are exercised, there is an income tax & NI charge for you (your employer has to pay NI as well!). There are a number of key milestones throughout any share option process, and the potential tax implications may differ at each stage: Share Options are becoming a more popular way of rewarding key staff members as it encourages loyalty whilst incentivising employees to reach targets thus aiding the business.
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