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Share Option Tax Calculator
The tax on exercising unapproved options, or options over a listed company, at 2026/27 rates
Share Option Tax Calculator 2026/27
What will you keep when you exercise your share options?
Unapproved options, and options over a listed company, are taxed as earnings on the day you exercise. The gain is the market price less what you pay. Enter your figures to see the tax and what is left.
Based on tax rates and allowances in England, 2026/27
Your salary before tax, plus bonuses and any other taxable income. Leave the option gain out, it goes below.
Shares that can be sold readily carry National Insurance and go through payroll. Other unapproved options pay income tax only, through Self Assessment.
Some plans, often at US companies, make you pay the employer’s 15% National Insurance too. It is worked out on the full gain.
We assume you are the higher earner in your household, because the High Income Child Benefit Charge falls on the higher earner.
What the numbers say
Enter your salary, the number of options, the market price and the exercise price to see the tax and what you keep.
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Where the gain goes
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Illustrative only, not financial advice. Based on tax rates and allowances in England for 2026/27. Personal allowance £12,570, reduced by £1 for every £2 of income over £100,000. Basic rate 20% to £50,270, higher rate 40% to £125,140, then 45%. Employee National Insurance 8% between £12,570 and £50,270 and 2% above, employer National Insurance 15%. National Insurance is worked out on an annual basis, which is exact for directors and a close approximation for most employees. Unapproved options are taxed as earnings on the gain at exercise, the market value less the exercise price. National Insurance applies where the shares can be sold readily. Where employer National Insurance is transferred to you, it is 15% of the full gain. It is deductible for income tax but does not reduce the gain liable to National Insurance. The High Income Child Benefit Charge is 1% of the benefit for every £200 of adjusted net income over £60,000, the whole benefit at £80,000. Growth after exercise is a capital gain. Scottish income tax bands differ. The results depend entirely on what you enter and your circumstances may differ. Talk your figures through with us, the first conversation is free.
How unapproved share options are taxed
When you exercise an unapproved option, the gain is taxed as earnings. The gain is the market value of the shares that day, less the price you pay for them. It is added to your salary and taxed in the band it lands in, whether you sell the shares or not.
If the shares can be sold readily, for example on a stock exchange, National Insurance is due as well and it all goes through payroll. Some plans also make you liable for the employer’s 15% National Insurance. It is 15% of the full gain, and it is deductible for income tax only. So a £10,000 gain costs £1,500 of employer National Insurance, with income tax on £8,500.
If your options are qualifying CSOP or EMI options, the rules are different and usually kinder. Use the EMI and CSOP share option calculator instead. For shares that simply vest, use the RSU tax calculator, and for a cash bonus the bonus tax calculator. Growth after you exercise is a capital gain, which the capital gains tax calculator covers. The salary sacrifice calculator shows what a pension sacrifice could save.
Frazer James is an independent, FCA-regulated firm of Certified Financial Planners. Advice covers the whole of the market, there is no initial fee, and the first meeting is free.
Taxed when you exercise
The gain on an unapproved option is earnings on the day you exercise. The tax is due even if you keep the shares and their price later falls.
Employer NI on the full gain
If you are liable for the employer’s 15% National Insurance, it is 15% of the full gain. Income tax is then worked out on the gain less that amount.
You choose the timing
Unlike RSUs, you usually decide when to exercise. Spreading exercises across tax years can keep more of the gain out of the higher bands.
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Questions people ask about tax on share options
Are share options taxed when I exercise them?
Unapproved options are. The difference between the market price and what you pay is taxed as earnings on the day you exercise. National Insurance applies too if the shares can be sold readily. Qualifying CSOP and EMI options exercised at the agreed price usually have no income tax on exercise.
How is employer National Insurance on share options worked out?
Where you are liable for it, the employer’s National Insurance is 15% of the full gain. HMRC lets you deduct it when working out income tax, but it does not reduce the amount liable to National Insurance. On a £10,000 gain that is £1,500 of employer National Insurance, with income tax on £8,500.
Do I pay National Insurance on share options?
Only if the shares are readily convertible assets. Broadly, that means they can be sold on a stock exchange or there are arrangements for selling them. In that case employee National Insurance is due on the gain through payroll. Options over shares in a private company with no market usually carry income tax only.
Can share options affect my Child Benefit?
Yes. The gain on an unapproved option is income, so it can take your adjusted net income over £60,000. The High Income Child Benefit Charge then claws back 1% of the benefit for every £200 above that. Any employer National Insurance you pay reduces the income used for the charge.
How can I reduce the tax on exercising options?
Timing is the main lever, because you usually choose when to exercise. Spreading exercises across tax years can keep the gain out of the higher bands and below £100,000. A pension contribution in the same tax year also extends your basic rate band. Check the option’s expiry date before waiting.
Reviewed by
BSc, MLIBF, PETR, Chartered ALIBF · Co-Founder and Chartered Associate
Chris has spent over a decade in financial planning and specialises in research and technical analysis. He checks every figure and calculation on this page before it is published.
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