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Hi.If your scheme is an unapproved one, you are right in your belief that you will pay income tax and national insurance contributions on the difference between the open market value of the shares when you exercise them and what you pay for them. The sum of the amount you pay for the shares and the amount you pay tax and NIC on then becomes your cost for Capital Gains tax purposes.If the scheme was an approved one, you would not pay income tax and national insurance contributions. Your cost for CGT purposes would be the sum of what you paid for the shares when you exercised them plus any sum you may have paid to your employer when the option was granted to you.Take a look here for information on share option schemes and tax.I hope this helps but let me know if you have any further questions.