Unapproved share option schemes
Overview
A share option is a right that your employer grants you to acquire shares in the company.
The shares may be at no cost to you (nil option) or at a pre-determined price your employer sets (the option price). Under a share option scheme, your employer will predetermine:
- the number of shares you can acquire
- the option price, if any
- and
- the exercise period (that is, the dates from which, and by which, you may exercise your option).
Option to exercise
You can choose whether or not you wish to exercise an option to acquire shares. You may decide to let an option lapse if the option price agreed is higher than the market value of the shares.
This section explains the taxation of rights to acquire shares through unapproved share option schemes. This differs to the taxation of share options granted under:
- a Revenue approved Save As You Earn (SAYE) scheme
- or
- the Key Employee Engagement Programme (KEEP).
Taxation
You must pay on any gain you make on the exercise, assignment or release of a share option:
How you are taxed depends on the type of share option. There are two types of share options:
- a short option, which must be exercised within 7 years from the date it is granted
- and
- a long option, which can be exercised more than 7 years from the date it is granted.
How to pay tax on share option gains
How you pay this tax depends on when you realised that gain. For example, if you realised the gain prior to 1 January 2024, you are considered a 'chargeable person' for that year and tax is collected under self-assessment. If you realised the gain on, or after, 1 January 2024, your employer will collect the tax through payroll.
Note
If, during the year, you receive dividends as a result of your shareholding, you must declare this income. If you sell your shares (that you acquired by exercising an option), then you must also report details of this disposal on your tax return. You must report this disposal to Revenue, even if no tax is due.
What you need to do if you realise a gain prior to 1 January 2024
Next: Taxation of a short option