What's the real cost of a broken share scheme?
Test your numbers below. See what happens to your team's equity and shareholder value if HMRC disqualifies your EMI or CSOP scheme at exit.
Your scheme
Exit numbers
Net gain is pool value at exit minus what option holders pay to exercise. That net gain is what gets taxed, one way or the other.
Tax assumptions
Used to price the income tax charge if the scheme is disqualified, and to set the assumed employee NIC rate (2% above the upper earnings limit, 8% at basic rate).
Buyer due diligence
A buyer's tax due diligence typically prices in the full contingent liability, plus a margin for interest, penalties, and uncertainty over how HMRC would assess it. That amount usually comes off the price, or sits in escrow, at completion. This is illustrative, not a guaranteed outcome - every deal is negotiated on its own facts.
Notes & methodology
Net gain is the pool value at exit minus what option holders pay to exercise. That's the amount that gets taxed, one way or the other.
If compliant, the net gain is taxed as a capital gain: at 18% (2026/27 Business Asset Disposal Relief rate, if applicable, up to the £1m lifetime limit per person) or at 18%/24% otherwise, less a combined annual CGT exemption of £3,000 per option holder. It's a personal liability for each option holder, settled through self-assessment. The company has no PAYE obligation at all.
If disqualified, the gain is treated as employment income. Income tax is due at the marginal rate you select, plus employee NIC (2% above the upper earnings limit, 8% below it), both usually withheld through payroll. Employer NIC (15% for 2025/26 and 2026/27) is also due, as an additional cost on top, not deducted from the option holder's gain.
Total tax exposure is the gap between what's owed in each scenario, combining the employee-side loss and the employer NIC cost. Hit to exit proceeds applies the retention/price-adjustment assumption on top, to reflect how a buyer typically treats a contingent tax liability found in due diligence.
EMI: missed the 6 July notification deadline following the tax year of grant, an option holder dropping below 25 hours a week or 75% of working time, the company failing the trading activities test, breaching the gross assets (£120m) or employee headcount (500) limits, or becoming a subsidiary. Unexercised more than 90 days after a disqualifying event, tax-advantaged treatment is lost from that point on.
CSOP: exercising before the three-year mark without a qualifying reason (redundancy, retirement, death, injury, or a change of control). CSOP doesn't carry EMI's Business Asset Disposal Relief carve-out, so most CSOP holders would need to separately hold 5%+ of the company and its voting rights to reach the 18% rate, which most don't.
This calculator is for illustrative purposes only and does not constitute tax, financial, or legal advice. It uses 2026/27 UK tax rates and thresholds as at July 2026, which may change. It models a full loss of tax-advantaged status; a partial disqualifying event (such as a mid-scheme leaver) may affect only part of the gain. Buyer behaviour at exit varies by deal and is not guaranteed. Always take advice specific to your scheme and circumstances.
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