If your company gave an employee or a director shares last year, HMRC may already have sent you a £100 penalty. It went out this month. The bigger problem is the one landing on 6 October 2026, when the charge jumps by another £300.
TL;DR: Employment related securities (ERS) returns for 2025-26 were due on 6 July 2026. HMRC has started issuing the automatic £100 late filing penalty. A further £300 applies if the return is still outstanding on 6 October 2026, another £300 on 6 January 2027, and £10 a day from 6 April 2027. Paying the penalty does not close the obligation - you still have to file.
Who Actually Has to File an ERS Return?
Any company that gave shares or share options to an employee or director in the 2025-26 tax year, and any company with an ERS scheme already registered with HMRC. That second group is the one people forget. Once a scheme is on the register, HMRC expects a return every year until you formally close it, even if nothing happened.
More than 20,000 UK companies operated a tax-advantaged employee share scheme in 2024-25 (HMRC Employee Share Scheme statistics, 2026). That figure excludes unapproved options, growth shares and one-off share awards, which carry the same reporting duty and no tax reliefs to make them memorable.
In our experience the companies that get caught are rarely the ones running a formal scheme with an adviser attached. They are the ones that issued a founder's brother 5% of the shares two years ago and have not thought about it since.
What Does the Penalty Timetable Look Like?
Four stages, all automatic, all dated from the 6 July filing deadline.
| Trigger date | Penalty | Running total |
|---|---|---|
| 7 July 2026 | £100 | £100 |
| 6 October 2026 | £300 | £400 |
| 6 January 2027 | £300 | £700 |
| From 6 April 2027 | £10 per day | £700 plus |
The amounts come from HMRC's guidance to agents, which confirms the £100 automatic charge plus £300 at three months and a further £300 at six months (Agent Update issue 147, 2026). Daily penalties of £10 start nine months after the deadline and run until the return is in.
Every penalty applies per scheme, not per company. Two registered schemes and a missed year means two sets of charges.
Do You Still Have to File After Paying the Penalty?
Yes, and this is where the cost multiplies. HMRC's guidance is explicit: if a client appeals an ERS late filing penalty, any outstanding returns must still be submitted to prevent further penalties (Agent Update issue 147, 2026).
Paying £100 and moving on feels like settling the matter. It is not. The clock keeps running, so the same missed return picks up £300 in October and £300 again in January. A company that ignores a £100 notice in September is looking at £700 by the new year for a form that takes an afternoon.
If you have nothing to report for the year, you file a nil return. It is the same submission with no data in it, and it stops the escalation the same way a full return does.
The Events That Should Have Been Reported
The common ones are share acquisitions by employees and directors, grants and exercises of share options, and shares bought back from or sold by a director shareholder. Restricted shares, growth shares and unapproved options all sit in the non-tax-advantaged category and all need reporting.
Enterprise Management Incentive (EMI) options have their own notification rules on top of the annual return. For options granted on or after 6 April 2024, the notification deadline is 6 July following the tax year of grant (GOV.UK ERS guidance, 2026). Miss it and the options can lose their tax-advantaged status altogether, which is a far more expensive outcome than £700 of penalties. Our guide to EMI share options in 2026 covers the qualifying conditions in detail.
EMI is comfortably the most used scheme in the UK, with the number of companies operating one rising from 16,460 to 18,570 across three years (HMRC Employee Share Scheme statistics commentary, 2026). That growth is exactly why more companies are walking into the reporting duty for the first time.
The Registration Trap That Catches New Schemes
You cannot file an ERS return for a scheme HMRC does not know about. Registration comes first, through the ERS service inside your HMRC online account, and the scheme reference number is not issued instantly.
For a non-tax-advantaged arrangement, registration is due by 6 July following the tax year in which the first reportable event happened. So a growth share issue in March 2026 needed registering by 6 July 2026, and the annual return was due the same day.
What we see most often is a company that registers in a panic, waits several days for the reference, and files a fortnight later than it meant to. If you are dealing with this now, register today rather than at the end of the week. The 6 October charge does not care why the return was late.
Can You Appeal an ERS Penalty?
You have 30 days from the date of the penalty notice to appeal, and you need a reasonable excuse for the delay. HMRC will accept a late appeal where there is a good reason for both the original failure and the delay in appealing.
A reasonable excuse means something genuinely outside your control that persisted through the period of the delay: serious illness, bereavement, or a documented failure of HMRC's own service. Not knowing about the obligation is not a reasonable excuse, and neither is your adviser's oversight on its own.
File the return first, then appeal. An appeal on an unfiled return leaves the escalating charges running in the background while HMRC considers it. HMRC reviews the appeal itself, and if it refuses, the next step is the First-tier Tribunal. The same logic applies across HMRC's regimes, as our note on late payment penalties sets out. If share schemes are part of how you pay people, it is worth reviewing the whole picture alongside your salary and dividend mix.
Frequently Asked Questions
We closed the share scheme last year. Do we still need to file?
Yes. A return is due for the tax year in which the scheme closed, and the closure has to be recorded through the ERS service. Simply stopping the scheme internally leaves it live on HMRC's register and keeps generating penalties.
Our company has no PAYE scheme. Does the return still apply?
Not always. Companies with a non-tax-advantaged arrangement are outside the ERS return requirement where the company or group is not registered for PAYE and does not need PAYE for the reportable event (GOV.UK ERS guidance, 2026). Most trading companies with employees will not meet that test.
How many penalties can one late return generate?
Up to £700 in fixed charges by 6 January 2027, then £10 for each further day from 6 April 2027. Charges apply separately to each registered scheme, so a company with an EMI plan and an unapproved option plan can be hit twice for the same year.
We sold shares back from a departing director. Is that reportable?
Yes. A buyback of shares from an employee or director shareholder is a reportable event, as is a sale at above or below market value. It goes on the annual return for the tax year in which it happened, alongside the usual close company director reporting obligations.
Does the penalty affect our corporation tax position?
No. ERS penalties are not deductible for corporation tax, and they sit outside the corporation tax return entirely. They are charged under the share scheme reporting rules and collected separately.
If you are not sure whether a share issue, buyback or option grant from last year triggered a reporting duty, get in touch. We will check what should have been registered, file any outstanding returns before the 6 October charge, and tell you honestly whether an appeal is worth making.