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An Enterprise Management Incentive (EMI) scheme is a registered scheme that allows employers to give tax-free shares to their employees as a reward for their efforts at work.
First things first, what’s an option? It’s an agreement to buy shares in the future at a set price, called the strike price. Through the scheme, you don’t need to pay Income Tax or National Insurance if you buy shares for the strike price. And you pay a reduced rate of Capital Gains Tax when you sell the shares for a profit. This rate is 10%.
Being part of the scheme makes a large difference. Without it, you’d owe Income Tax and National Insurance on the initial £5,000 profit you made one year after purchase. Depending on your salary and tax code, this could be anywhere between £0 to £3,000. Then you’d have to pay the higher rate of Capital Gains Tax when you sell the shares. Again depending on your salary, this could be anywhere between £3,200 to £5,600.
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