A share option scheme is an arrangement under which a company’s employees (or selected employees) are granted the right to buy shares in the company at a fixed price.
Normally the employee can take up this right (exercise the option) after a specified period of time (often two years or more) if they are then still working for the company. If in the intervening period the value of the company’s shares has grown (normally because its profits have increased) the employee will be able to buy the shares at a price which by then is at a discount to their market value.
Share option schemes in the UK can have tax advantages.
For further information, including on tax on share options, please follow these links: