Jurisdiction(s):
United Kingdom

Defining UK employment-related securities options: scope, employment nexus, and the section 471 ITEPA 2003 deeming rule

Published by a LexisNexis Share Incentives expert

Practice notes

Employment-related securities options—specific tax rules

A distinct set of income tax provisions, set out in Chapter 5 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), applies to securities options connected to employment. These rules generally bring unapproved share options—ie those granted outside a tax-advantaged share ownership arrangement—within the scope of income tax. This Practice Note explains:

what constitutes a securities option, and
when a securities option is regarded as employment-related

For comprehensive guidance on the income tax treatment of employment-related securities options, see Practice Note: Securities options—income tax treatment.

An unapproved option that does not fall within the statutory definition of a securities option—for example, a share option obtained under arrangements whose main purpose is the avoidance of tax or National Insurance contributions (NICs)—is not charged to income tax under the securities option rules. Instead, where such options are employment-related, they are typically taxed under the specific regime for convertible securities. For further detail on these charges, see Practice Note: Convertible securities—tax treatment.

Different provisions apply to tax-advantaged share options, including options granted under enterprise management incentive (EMI) schemes, save as you earn (SAYE) schemes and company share option plans...

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Web page updated on 21/05/2026

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