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Company Share Option Plan (CSOP)

A Company Share Option Plan (CSOP) is a share option plan where a company can grant tax-free shares to an employee or a company director

Why am I not taxed on my CSOP?

Usually, when your company pays you shares, you have to pay Income Tax and National Insurance on their market value. This is because they’re treated as extra income added onto your salary. These taxes also apply when you buy shares from your company at a price that’s lower than the market value; in this scenario, you simply 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 the “strike price” (this is the price you pay when you buy) and the market value at the time of purchase. 

CSOPs are usually used by companies that aren’t big enough to qualify for an Enterprise Management Incentive (EMI).

How does a Company Share Option work?

There are a few things to remember when it comes to being part of a CSOP:

  • The option you’re sold 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
  • CSOPs are agreed upon at the company’s discretion – different employees can be offered different options

Are CSOPs totally tax free?

No. Not totally. 

You might still have to pay Capital Gains Tax if you sell the shares e.g. if you make a profit over the CGT allowance of £12,300. If this is the case, you’ll have to declare and pay tax on your profits. You can do this via a Self Assessment tax return.

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