NOT financial advice - seek advice from a professional for your specific situation

    TaxKilnUK tax guidance
    TaxKilnUK tax guidance

    Company Share Option Plan (CSOP)

    CSOP is a DISCRETIONARY tax-advantaged share option scheme available to any UK company of any size, in any trade. **Individual cap £60,000, DOUBLED from £30,000 from 6 April 2023** (Finance (No. 2) Act 2023). Company selects which employees receive options + grants them the right to buy shares at TODAY'S MARKET PRICE at a future date (3-10 years after grant). **Tax treatment**: NO income tax + NO NIC at grant or exercise IF (a) exercise is at least 3 YEARS after grant; (b) options exercised at or above market value at grant; (c) qualifying conditions met. Only CGT on eventual disposal. CSOP is the natural successor scheme when a company outgrows EMI (size, headcount, excluded trade). **Key April 2023 reforms**: individual cap doubled to £60,000 + 'WORTH HAVING' SHARE CLASS CONDITION REMOVED (allowing CSOP over growth shares, hurdle shares, non-standard share classes). NO 5% BADR exemption (unlike EMI), standard BADR mechanics apply, typically excluding most CSOP participants from BADR.

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    Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact HMRC. Read our editorial scope →

    What this relief is, in plain English

    CSOP is the discretionary tax-advantaged share option scheme for UK companies that don't fit EMI's start-up profile. April 2023 reforms doubled the individual cap to £60,000 + removed the 'worth having' share class restriction, making CSOP materially more useful for mid-sized + PE-backed companies. Mechanics: company grants option at market value at grant; employee exercises 3-10 years later; no income tax / NIC if exercised at least 3 years after grant + at market value; only CGT on disposal. Key differences vs EMI: (1) no company size restrictions (any size); (2) no excluded trades (any trade); (3) lower individual cap £60k vs £250k; (4) no BADR 5%-relaxation (standard BADR mechanics, typically inaccessible to typical employees); (5) discretionary participation (vs all-employee for SAYE/SIP). Used by: AIM + Main Market listed companies (large + listed often use CSOP as part of remuneration package); PE-backed scale-ups where the share class structure makes EMI unworkable; companies in excluded trades; mid-sized companies that have grown past EMI thresholds. Many companies operate EMI + CSOP in combination for different employee tiers.

    How it works

    Grant at market value (AMV), £60k individual cap

    Company grants option to selected employee at exercise price = Actual Market Value (AMV) at grant. Maximum value of all subsisting CSOP options per employee: £60,000 (doubled from £30,000 April 2023). Measured by AMV at each grant date. SAV pre-approval recommended (90-day validity). NO income tax + NO NIC at grant.

    3-year minimum hold + 10-year maximum exercise window

    Option must be exercised AT LEAST 3 YEARS after grant + WITHIN 10 YEARS of grant. Exercise within 3 years (outside good-leaver scenarios) → full income tax + NIC on gain. Exercise at year 3-10 + at or above market value at grant → NO income tax + NO NIC on exercise. Only CGT on subsequent disposal.

    April 2023 reforms, £60k cap + worth-having removal

    Finance (No. 2) Act 2023 doubled cap from £30k to £60k effective 6 April 2023 + removed 'worth having' share class condition. CSOP now available over growth shares, hurdle shares, restricted shares, non-standard ordinary share classes. Materially more useful for PE-backed + mid-sized companies post-April 2023.

    Disposal mechanics, standard CGT, no BADR relaxation

    On disposal of CSOP shares: gain at standard CGT rates 18% basic / 24% higher. NO 5% BADR relaxation (unlike EMI). Most CSOP participants don't reach 5% shareholding → standard CGT rates apply. Material difference from EMI on the same gain (EMI BADR 14%/18% vs CSOP CGT 24%).

    Who qualifies

    Interactions with other reliefs

    EMI

    Mutually preferable depending on company eligibility. EMI for start-ups + scale-ups under thresholds; CSOP for larger or excluded-trade companies. Many companies operate both. CSOP options count toward EMI's £250k individual cap if both schemes operated in same company.

    BADR

    CSOP doesn't carry EMI's 5%-relaxation, standard BADR mechanics apply. Typically inaccessible to most CSOP participants. Material disadvantage vs EMI on disposal at exit.

    SAYE + SIP

    CSOP discretionary; SAYE + SIP all-employee. Many large companies operate CSOP for senior employees + SAYE / SIP for broader workforce.

    Common mistakes + audit triggers

    Worked example

    Adaeze, London - Senior product manager at AIM-listed scale-up, granted CSOP options 2023 (2027-2028)

    Adaeze granted £60,000 of CSOP options April 2023 (post-doubling) at £4/share AMV. 15,000 shares total. Vesting + exercises Q3 2027 at £10/share market value. Holds + sells Q3 2028 at £12/share.

    Calculation: **Grant (April 2023):** £60,000 of options at £4/share = 15,000 shares. No tax. **Exercise (Q3 2027, 4+ years post-grant):** pays £60,000 to acquire 15,000 shares worth £150,000. No income tax + no NIC (3-year hold met + at AMV). **Disposal (Q3 2028 at £12/share):** 15,000 × £12 = £180,000. Gain: £180,000 - £60,000 = £120,000. **Less AEA £3,000.** Taxable: £117,000. CGT at higher rate 24% = £28,080. **No BADR** (Adaeze holds <5%, typical CSOP position). **Net to Adaeze: £180,000 - £60,000 - £28,080 = £91,920.** Vs equivalent salary at higher rate 42% combined IT+NI: £91,920 net would require ~£158,500 gross salary + ~£23,800 employer NIC = ~£182,300 company cost. **CSOP route company cost: ~£28,080 effective (CT relief on the spread); net employer cost approximately zero.** CSOP delivers ~£182,000 of company cost saving on equivalent £91,920 net-to-employee.

    Statute reference: ITEPA 2003 Chapter 8 Part 7 + Schedule 4 + Finance (No.2) Act 2023 ITEPA 2003 ss.521-547 + Sch.4; FA(No.2) 2023 (April 2023 reforms). HMRC manual: ETASSUM40000 onwards.

    Frequently asked questions

    What happens if I miss the Self Assessment deadline?+
    The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.
    Do I need an accountant or can I file Self Assessment myself?+
    Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.
    How do payments on account work?+
    When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.
    When would I use CSOP instead of EMI?+
    CSOP is the natural choice when EMI is unavailable: (1) **Company too large**: gross assets >£30m (rising to £120m from April 2026); employee headcount >250 (rising to <500). (2) **Excluded trade**: banking, insurance, money-lending, debt-factoring, hire-purchase financing, leasing, legal/accountancy services, property development, farming, forestry, shipbuilding, hotel management, coal/steel. (3) **Group structure**: CSOP can operate as a group scheme across associated companies, more flexible than EMI's qualifying-subsidiary mechanics. (4) **Discretionary participation**: CSOP allows the employer to select participants (unlike SAYE / SIP which must be all-employee). For mid-sized + larger companies + companies in excluded trades, CSOP is the workhorse tax-advantaged share scheme. Many companies operate BOTH: EMI for senior employees within the £250k individual cap + CSOP for additional grants or for employees CSOP-only-eligible.
    What was the April 2023 doubling + the 'worth having' condition removal?+
    **Finance (No. 2) Act 2023** introduced two CSOP reforms effective from 6 April 2023: (1) **Individual cap doubled** from £30,000 to £60,000, first cap increase in 27 years; (2) **'Worth having' share class condition REMOVED**: previously CSOP options had to be over a 'worth having' class of shares (broadly the share class that the controlling shareholders held). This restricted CSOP to standard ordinary shares. Removal means CSOP can now be granted over GROWTH SHARES, HURDLE SHARES, RESTRICTED SHARES, + other non-standard share classes, making CSOP useful in cap-tables with multiple share classes (typical in PE-backed companies). **Practical implications**: CSOP became materially more useful for mid-sized + PE-backed companies post-April 2023. The £60,000 cap is the substantive cap; the worth-having removal enabled CSOP in structures previously locked out.
    Why don't CSOP shares qualify for BADR with the 5% relaxation EMI has?+
    CSOP doesn't carry the EMI carve-out from the 5% shareholding requirement for BADR. Standard BADR requires 5%+ shareholding for 24+ months + officer/employee status + trading company. Most CSOP participants are middle-management employees holding sub-5% positions, so BADR generally isn't accessible on CSOP shares. **Practical implication**: CSOP gain on disposal taxed at standard CGT rates 18% basic / 24% higher. Vs EMI shares at BADR 14%/18% on first £1m. On a £200,000 gain: CSOP CGT 24% = £48,000; EMI BADR 18% (April 2026) = £36,000, £12,000 difference per typical employee. EMI's 5% relaxation is a material advantage when both schemes would otherwise be available, but CSOP wins when EMI isn't available at all due to company size / trade.
    Can CSOP options be granted over restricted or growth shares post-April 2023?+
    Yes, the removal of the 'worth having' condition in April 2023 specifically enabled this. CSOP can now be granted over: **Growth shares** (shares with rights only over future value above a defined hurdle); **Hurdle shares** (similar to growth shares with performance thresholds); **Restricted shares** (shares with restrictions on transfer, voting, dividends); **Non-voting ordinary shares**; **Founder vs investor share class variants**. The flexibility makes CSOP much more useful in PE-backed companies + mid-sized companies with sophisticated cap tables. Valuation methodology adjusts: the exercise price must equal or exceed the ACTUAL MARKET VALUE (AMV, with restrictions factored in) at grant. This differs from EMI which uses UMV (Unrestricted Market Value). Specialist tax + valuation advice recommended for growth-shares CSOP grants, the valuation mechanics matter substantially for compliance + tax outcomes.

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