Option Plan – Profit Sharing for UK Employees
Option plan – profit sharing for key employees
EMI, CSOP and other British schemes for motivating and retaining talent
What is an option plan?
An option plan (share option scheme) is a mechanism that gives employees or key collaborators the right to buy shares in the company in the future at a pre-agreed price. If the company grows, the value of the shares grows, and the employee benefits from that growth – without having to be a shareholder from day one.
The British tax system (HMRC) offers exceptionally favourable tax treatment for approved option schemes, making them an effective tool for attracting and retaining talent.
Types of British option plans
EMI – Enterprise Management Incentives
The most popular scheme for small and medium-sized UK companies. On exercising the option, the employee pays Capital Gains Tax (20%) instead of Income Tax (up to 45%). The company can deduct the option costs from its tax base. Limits: max. 250 employees, gross assets max. £30m.
CSOP – Company Share Option Plan
An approved scheme for companies that do not meet the EMI conditions (larger companies, listed companies). Favourable tax treatment, option limit of £60,000 per employee. Suitable for larger and growing companies.
Why implement an option plan
- Retaining key employees – options typically vest over 3–4 years, giving the employee an incentive to stay
- Attracting talent – start-ups and growing companies compete with multinational corporations thanks to attractive option packages
- Tax efficiency – EMI options dramatically reduce the tax burden for both the employee and the company
- Performance motivation – employees who share in the company's growth work more like co-owners
How we help
Implementing an option plan involves legal, tax and accounting aspects. We coordinate the whole process:
- Assessment of the company's eligibility for EMI or CSOP
- Designing the plan structure (vesting schedule, strike price, conditions)
- Preparation of the option agreement and plan documentation
- HMRC notification of EMI options (mandatory within 92 days of grant)
- Ongoing administration and annual reporting to HMRC
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