ERS annual returns – actions to take for the 2025/2026 tax year
If your business offers UK employee share plans, growth shares or share awards, you need to do the following by 6 July 2026 for the 2025/2026 tax year:
- complete end of year reporting for share plans and arrangements
- register all new share plans and arrangements on the HMRC online system
- self-certify new tax-favoured share plans.
If you don't take the above actions in time, you will be subject to automatic penalties and will lose the tax-favoured treatment for certain share options (including CSOP options).
The following automatic penalties will apply:
- immediate £100 penalty for filing after the deadline of 6 July 2026
- additional £300 penalty if filing is three months late
- additional £300 penalty if filing is six months late.
There can also be a:
- £10 per day penalty if the filing is more than nine months late and HMRC decides to impose such daily penalty
- penalty of up to £5,000 for a material inaccuracy in a return which is not immediately addressed.
What do you need to do?
If any reportable events have taken place concerning either tax-favoured plans or non tax-favoured plans and arrangements during the 2025/2026 tax year, you will need to report them. "Arrangements" include the acquisition of employment-related securities by employees and directors generally, not just under a formal plan. This would include growth shares and the acquisition of restricted and unrestricted shares.
Reportable events include the following:
- grant of options
- exercise of options
- certain lapses of options
- acquisition of shares
- events under the restricted shares legislation and anti-avoidance rules.
You will need to register all new employee share plans and arrangements online. You will also need to self-certify that any new tax-favoured share plans (EMI, CSOP, SIP and SAYE) meet certain requirements.
If you have not already used the HMRC website for employment-related securities, you will not be able to complete your end of year reporting until you have registered your plan or arrangement with HMRC. This can take over two weeks, so do not leave it until the last minute!
Nothing to report?
If you have previously registered a plan or arrangement but have no reportable events for the 2025/2026 tax year, you must submit a "nil return" to avoid automatic penalties arising for a non-filing.
Notification of EMI option grants
You also need to notify HMRC of the grant of any EMI options in the 2025/2026 tax year by 6 July 2026.
Despite the extension of the deadline (from 92 days following grant), we would still recommend that any EMI option grants are notified to HMRC promptly as they occur during the year, given that the deadline now coincides with the deadline for the annual reporting obligations outlined above.
The requirement for grant notifications will be removed for EMI options granted on or after 6 April 2027. EMI option grants will need to be included in the end of year reporting process for the 2027/2028 tax year onwards (with the first deadline being 6 July 2028).
Don't forget!
- Take screenshots of every stage of your end of year reporting, and for all other activity on the HMRC online site (including the notification of EMI option grants), for your records.
- Check that the company is still fully compliant with applicable EMI and CSOP rules when granting new tax-favoured options.
- If you have granted options over shares in a non-UK company to employees of a UK subsidiary, it will be simpler for the UK subsidiary to be responsible for the online registration, self-certification and reporting obligations.
- Check your option plan rules and option agreements carefully when employees are ceasing employment, to ensure that the correct treatment is followed and that the tax implications are understood.
- If you are planning on using any discretions in your option plan or agreements to allow EMI or CSOP option exercises or amend the vesting of such options, we recommend contacting us for advice to ensure you comply with HMRC's guidance on the use of discretion.
What's new?
- Are you up to date on the extension of EMI option schemes to larger trading companies? This is an exciting opportunity for some companies that were previously unable to offer this tax-advantaged scheme to their employees. Changes have also been made to the limits on both the EMI scheme value and the EMI exercise period. We've set out all you need to know about the changes here.
- Did you know that existing option agreements can be amended so that options can be exercised and the shares sold in a PISCES trading event, without losing valuable tax benefits? Make sure you're up to speed by checking out our overview of how the UK's new private securities trading platform works. If you're considering making changes to your option terms to take advantage of the introduction of PISCES, we can guide you through the process to ensure that the tax advantages are retained.
- We recently updated and expanded our Guide to Global Share Option Plans, which now covers 11 jurisdictions with detailed information to help you navigate the key legal, regulatory, tax and governance considerations when establishing share option plans and granting options globally.
Here to help
Please get in touch with a member of our Employee Incentives team if you need assistance or any further information.
