Share Options and Equity Awards Across Borders: the 14-Day Election, EMI, and Awards That Straddle a Move

Almost every share an employee takes in a private company is a restricted security. The test is whether restrictions have been imposed directly or indirectly by any contract, agreement, arrangement or condition, and whether they depress the market value of the security (ERSM30310, HMRC). Leaver provisions, vesting schedules, compulsory transfer clauses and forfeiture terms all count. If your paperwork says you can be made to hand the shares back for less than they are worth, you are in the regime whether you meant to be or not.

The default treatment is a deferral trap. Because the restrictions depress the value, you are taxed on less at acquisition, and the untaxed slice comes back as employment income when a chargeable event happens, typically when restrictions are lifted or the shares are sold. Forfeitable shares are more extreme: where the risk of forfeiture ceases within five years, section 425 means no charge on acquisition at all, and when the forfeiture or any other restriction is lifted, that is a chargeable event under the normal working of Chapter 2 (ERSM30370, HMRC). Without an election, the whole of the value can be building up as future employment income instead of capital gain.

The section 431 election reverses this. Employer and employee jointly elect to ignore all of the restrictions, which increases the amount charged to tax and NICs at acquisition and removes any future Chapter 2 charge (ERSM30450, HMRC). You pay income tax now on the difference between what you paid and the full unrestricted value, and from then on the growth belongs to Capital Gains Tax: 18% or 24% for 2026/27 (CGT rates, GOV.UK).

The practicalities are easier than the deadline. HMRC does not insist on its template: an election is valid so long as employer and employee have agreed the key terms in writing in no less detail than HMRC's own form, and electronic signatures are acceptable if they can be verified and stored, and the same page confirms there is no extension of the 14-day time limit (ERSM30460, HMRC). It is kept as evidence with the employer's records, not submitted for approval. The economics usually favour signing: at subscription the gap between restricted and unrestricted value is typically small, so the upfront cost is small or nil, while the cost of not signing surfaces years later as employment income on exit. That asymmetry is why protective elections are standard practice.

The election earns its keep where shares are cheap today, restrictions are heavy and the upside is large. Three fact patterns dominate; the fourth row of the table shows the contrast case where there is little to elect over.

The US profits interest case is where the 14 days are most often lost: the grant agreement is governed by Delaware law, and nobody on the US side has heard of section 431. Whether a particular profits interest falls squarely within the UK restricted securities charge depends on its terms, but the protective election costs little precisely because these interests are typically worth little at grant, while the downside of missing it is income tax and possibly NIC on a share of the eventual exit. The same goes for a leveraged co-invest: borrowing part of the subscription price changes the risk, not the UK analysis. If you have signed, or are about to sign, anything described as a profits interest, sweet equity or co-invest, treat the 14-day clock as already running. Our guide to selling shares in your company covers the other end, when the equity is finally sold.

EMI remains the most generous UK option regime, and from 6 April 2026 it reaches much larger companies: gross assets of £120 million or less and fewer than 500 full-time employees. An employee can hold options over shares worth up to £250,000 in a three-year period, must work for the company at least 25 hours a week or 75% of their total working time, and pays no income tax or NIC on exercise if the exercise price was at least market value at grant, provided the option is exercised within its 10 or 15 year window, and the option agreement states which applies (EMI, GOV.UK). Since 6 April 2023 no separate working time declaration is needed, though the working time requirement itself remains (ETASSUM54100, HMRC).

For a mobile employee, the fragile part is the list of disqualifying events, which includes the employee ceasing to be eligible, the company losing independence and changes to the option terms. If the option is exercised within 90 days of a disqualifying event the tax advantages are preserved; if not, a tax charge arises on exercise (ETASSUM57050, HMRC). A move abroad does not itself appear on that list, but the reorganisation that often accompanies one can: if your role shifts to an overseas group company, or your committed working time falls below the 25 hours or 75% threshold, eligibility is in question. Check before the move, and diarise the 90 days if a disqualifying event has already happened.

US citizens holding EMI options have a separate problem: none of the UK relief travels. The United States taxes its citizens on worldwide income wherever they live, and EMI has no equivalent US status, so the US applies its own rules to grant, exercise and sale, on its own timing and amounts. A UK exercise with no UK income tax can still be a taxable event on the US return, with little UK tax to credit against it. Have the US position modelled before you sign, not at exercise; the wider picture for Americans living in the UK is covered in its own guide.

On sale, EMI shares have a further UK advantage: Business Asset Disposal Relief can apply without the 5% shareholding test that other shares need, provided the shares were acquired after 5 April 2013 and the option was granted at least two years before the sale. BADR taxes qualifying gains at 18% for disposals from 6 April 2026, against the main higher CGT rate of 24% (BADR, GOV.UK).

The commonest cross-border equity question we see is some version of: my RSUs were granted in New York but they vest after I move to London, so who taxes them? The instinctive answers, all of it or none of it, are both wrong. For internationally mobile employees the UK applies apportionment: the securities income is treated as accruing equally on each day of the relevant period, and it is then split between UK and non-UK parts on a just and reasonable basis, with HMRC expecting a split based on UK and overseas workdays to be the most commonly used method (ERSM162615, HMRC). For an option, the relevant period begins on the day the option is acquired and ends with the chargeable event or, if earlier, the day it vests (ERSM162565, HMRC).

Suppose an award within the securities rules is granted on 6 April 2024 while you work in the US, you move to the UK and start UK workdays on 6 April 2026, and the award vests on 5 April 2027 with a taxable amount of £90,000.

The same machinery runs in reverse when you leave: an award granted in London that vests after you move abroad usually keeps a UK slice for the UK workdays inside the relevant period, which is one reason leaving mid-award needs planning rather than assumption. Your residence position for each year, tested under the Statutory Residence Test, determines which rules apply to each slice, and where both countries tax the same amount, relief normally comes through the double tax treaty. New arrivals with ongoing overseas duties should also check Overseas Workday Relief, which can relieve the foreign duties element of employment income in the early years of UK residence.

Two practical warnings. Employers' global equity platforms often withhold on crude assumptions, so the withholding on your payslip is a cash flow event, not the answer: the true position is settled on the returns. And keep contemporaneous workday records for the whole relevant period, because the apportionment lives or dies on those numbers.

Whether tax on an equity gain is collected through payroll or through your return turns on whether the shares are readily convertible assets. Shares are readily convertible where, among other tests, they are capable of being sold on a recognised investment exchange, or trading arrangements exist or are likely to come into existence (ERSM170030, HMRC). Listed shares, and private company shares once a sale is in prospect, are the classic cases. Shares not otherwise readily convertible are still treated as such unless the employing company is entitled to a corporation tax deduction for them, which is why gains on most genuinely unmarketable private company shares stay outside payroll and go through Self Assessment instead.

When shares are readily convertible, the employer operates PAYE income tax and Class 1 NIC on the gain through payroll in the period of exercise or vesting. The tax on a large vesting can exceed that month's net salary, so employers typically sell enough shares at vest to cover the withholding; check what your plan does by default.

National Insurance has one feature unique to equity: the employer and employee can agree, or jointly elect, for the employee to meet the employer's liability to pay secondary NICs on share option gains and certain post-acquisition charges, and the employee then gets a deduction equal to the NICs transferred when working out the amount chargeable to income tax (ERSM170750, HMRC). These transfers are common in venture and PE backed companies, and since 1 May 2025 an employer using HMRC's pre-approved template no longer needs to send it to HMRC for approval. If your grant paperwork includes an NIC transfer, price it into your expected net proceeds before you sign.

For internationally mobile employees the payroll position layers on top of the apportionment above, and employers often withhold on everything, leaving you to reclaim through your return. That is one more reason cross-border equity holders almost always need to file.

If you are a UK employee joining a US private equity backed business, the tax work is front-loaded into the fortnight around signing. Here is the sequence we run.

The single most common failure is sequencing: the US lawyers perfect the grant paperwork over three weeks of redlines while the UK election window quietly expires. The election needs two signatures and the right wording inside 14 days, not a settled valuation or HMRC's blessing. Sign the protective election first, argue about everything else afterwards. Adviser onboarding has its own lead times, from identity checks to HMRC authorisation, so make contact as soon as an offer letter mentions equity; our guide to working with a UK tax adviser explains how to speed that up.

This is time-critical, document-driven work. We review the grant paperwork, advise on the restricted securities position, prepare the section 431 election for signature inside the 14 days, and deal with the apportionment and reporting when awards vest or are exercised across a move. Where there is a US side, and there usually is, we coordinate our US partners, Enrolled Agents and CPAs, so the UK and US filings are built from the same facts.

Everything is on fixed fees agreed upfront: personal tax returns from £350, non-resident and expat returns from £550, and complex cross-border work, which is where equity awards almost always sit, from £750. If you have just been offered equity, or a vesting is approaching and you have moved country since grant, book a free 30-minute clarity call and send the paperwork over before you sign anything. You can read more about how we work with internationally mobile clients on our expat tax adviser service page.