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Company Share Option Plan (CSOP)

A company share option plan is a share option plan where a company can grant tax-free shares to an employee or a company director.

Usually, when your company grants you shares, you have to pay Income Tax and National Insurance on their market value. It’s as if they would give you extra salary. This also applies if you can buy shares from your company at a price that’s lower than the market value – you’ll pay tax on the difference.

However, if your company gives you shares that are part of a CSOP, you won’t pay any Income Tax or National Insurance on the difference between what you pay for them (when you choose to buy them, also called the “strike price“) and what they are actually worth on the market at the time.

CSOP have a few restrictions:

  • these options must be granted at market value
  • you can only be granted up to £30,000 of options
  • any gain you make between the strike price and the market price is only exempt from Income Tax if the options are held for at least three years.

You might still have to pay Capital Gains Tax if you sell the shares (for example, if you made a profit over the CGT allowance). To pay tax on it, you would have to file a Self Assessment tax return.

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