Share awards for internationally mobile employees

Q: How does this look in practice?

Illustration only. Hannah is granted an option on 1 January 2024 that vests on 31 December 2026. She works only in the UK until she leaves on 5 April 2026, and is non UK resident for 2026 to 2027, working wholly abroad. She exercises in 2027 and makes a gain of £109,600. The relevant period is 1,096 days, so £100 accrues per day. The 826 days to 5 April 2026 give £82,600, taxable in the UK. The 270 days from 6 April to 31 December 2026 give £27,000 of unchargeable foreign securities income. Her new country of residence may also tax the gain, and any double tax relief turns on the treaty.

When an employee moves to or from the UK while holding share options or share awards, the UK does not simply tax the whole gain in the year it arises. Chapter 5B of Part 2 ITEPA 2003 spreads the gain evenly over a “relevant period”, which for options and RSUs runs from grant to vesting, and the part earned on overseas workdays in years of non residence, or relieved for qualifying new residents, falls outside UK tax. National Insurance follows a separate daily apportionment based on where the employee was liable to contribute.

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How does a move change the tax on a share award?

Since 6 April 2015 the employment related securities charges in Part 7 ITEPA 2003 apply regardless of where the employee lived when the award was made (ERSM162200). Instead of switching the charge on or off, section 41F works out how much of the “securities income” is taxable in the UK. It applies where any part of the relevant period falls in a tax year for which the employee was not UK resident, fell within the overseas part of a split year, or (for years before 6 April 2025) used the remittance basis.

The taxable amount is the full securities income less the part that is “foreign”. Foreign securities income is either unchargeable, which is outside UK tax altogether, or, for old remittance basis years, chargeable only when remitted. Residence itself is decided under the statutory residence test.

What is the relevant period?

Section 41G sets the period over which the gain is treated as earned:

Share options, including RSUs taxed as securities options: from the day the option is acquired to the day of the chargeable event or, if earlier, the day it vests (section 41G(8)). An option vests when it becomes exercisable, or exercisable subject only to time passing (section 41G(11)). An exercise after vesting does not stretch the period.
Restricted shares: from acquisition to the chargeable event, typically when the restriction lifts (section 41G(2)).
Shares acquired for less than market value: where they come from an option, from grant to vesting; otherwise broadly the tax year in which the notional loan arises (section 41G(6)).

Where an award vests in tranches, HMRC treats each tranche as vesting separately, so each has its own relevant period (ERSM162565). If the statutory period would not be just and reasonable, section 41G(9) substitutes one that is, for example where the facts show the award rewarded service before grant.

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How is the gain split between UK and overseas workdays?

Section 41H treats an equal amount of the securities income as accruing on each day of the relevant period. Each day’s slice then takes the tax status of the year it falls in:

In a tax year when the employee is UK resident, the slice is generally taxable in full (subject to Overseas Workday Relief, below).
In a tax year when the employee is not UK resident, the slice is unchargeable if the duties were performed wholly outside the UK. If some duties were performed in the UK, the slice is apportioned on a just and reasonable basis and only the overseas part is unchargeable (section 41H(8)).
In the overseas part of a split year, the same rule applies to that part of the year (section 41H(9)).

So a non resident who spent workdays in the UK during the relevant period can still owe UK tax on that slice, even if they have left the UK by the time of exercise. Section 41L allows a just and reasonable override if the daily spreading gives a distorted answer.

What about employees who arrive in the UK?

From 6 April 2025 Overseas Workday Relief is available to “qualifying new residents”: individuals who are UK resident and were not UK resident for the previous 10 tax years. They remain qualifying new residents for up to four tax years. Relief covers amounts that count as employment income under the employment related securities rules, as well as ordinary earnings.

For share income, HMRC’s example at EIM43575 spreads the gain over the relevant period, then takes the overseas workday fraction of each qualifying year’s slice. The employee must make an OWR election in the self assessment return for each qualifying year whose income is to be relieved, which costs the personal allowance and CGT annual exempt amount for that year, and must claim the relief in the year the gain is taxed. The relief for each qualifying year is capped at the lower of 30% of qualifying employment income and £300,000. For background on the new regime, see FIG regime vs remittance basis.

How do double tax treaties fit in?

If the employee is treaty resident elsewhere when the gain arises, they may be able to limit the UK charge to the part earned in the UK. HMRC explains at ERSM163120 that it follows the OECD approach: option gains are earned from grant to vesting, apportioned by workdays in each country. Some treaties differ; HMRC notes that the UK and US treaty apportions over the period from grant to exercise. For options, HMRC is prepared to apply workday apportionment without a formal treaty claim. The other country may tax its share under its own rules, so relief for double taxation often has to be claimed in one country or the other.

How should the employer run PAYE?

Where the shares are readily convertible assets, section 700A ITEPA 2003 lets the employer exclude the part of the gain likely to be foreign securities income when operating PAYE. HMRC says at ERSM162820 that the employer should deduct only on the net amount if it has enough information to make a reasonable estimate, and on the full amount if it does not. In practice that means tracking each employee’s travel and workdays from grant to vesting, not just in the year of exercise. Employers who also pay tax equalised employees need the same data for the equalisation calculation.

Is National Insurance apportioned the same way?

No. National Insurance has its own rule in paragraph 18 of Part 9 of Schedule 3 to the Social Security (Contributions) Regulations 2001, in force from 6 April 2015. The income is treated as paid in equal daily instalments over the relevant period (NIM06890), and the days on which the employee was not liable to UK contributions are disregarded. That depends on social security rules, not tax residence. HMRC’s examples at NIM06900 show that someone posted from the UK to a country with no social security agreement may stay liable for the first 52 weeks abroad, and someone arriving may be exempt for their first 52 weeks. Under EU coordination, an A1 certificate can keep an employee in the UK scheme throughout (NIM06905). See National Insurance when working abroad.

How does this look in practice?

Illustration only. Hannah is granted an option on 1 January 2024 that vests on 31 December 2026. She works only in the UK until she leaves on 5 April 2026, and is non UK resident for 2026 to 2027, working wholly abroad. She exercises in 2027 and makes a gain of £109,600. The relevant period is 1,096 days, so £100 accrues per day. The 826 days to 5 April 2026 give £82,600, taxable in the UK. The 270 days from 6 April to 31 December 2026 give £27,000 of unchargeable foreign securities income. Her new country of residence may also tax the gain, and any double tax relief turns on the treaty.

What mistakes come up most often?

Apportioning over grant to exercise instead of grant to vesting, which is wrong for most cases outside the US treaty.
Assuming that leaving the UK before exercise takes the whole gain out of UK tax.
Using the same days for tax and National Insurance when the social security position is different.
Not keeping workday records for the whole relevant period.
For new arrivals, forgetting that the OWR election is needed for the qualifying year in which the gain was earned, not just the year of exercise.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.