Jurisdiction(s):
United Kingdom

UK PAYE for employment-related securities options: chargeable events, readily convertible assets, best estimate valuation, cash and notional operation, NICs relief, internationally mobile employees, and payer obligations

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Practice notes

Pay as you earn (PAYE)

Pay as you earn (PAYE) is the system through which employers (and other payers) must deduct income tax, National Insurance contributions (NICs) and certain other statutory withholdings, and account for them to HMRC from specified payments of PAYE income. PAYE income comprises payments of:

employment income
pension income
social security income

See Practice Note: Scope of the PAYE system.

PAYE income includes cash amounts paid to employees or directors, for example salaries, bonuses and termination payments. Although non-cash remuneration generally falls outside PAYE, a significant exception applies where the payment is, or is deemed to be, a readily convertible asset. Whether PAYE obligations arise on the acquisition of securities when an employment-related securities option is exercised depends on whether those securities constitute readily convertible assets. For comprehensive guidance on the meaning of readily convertible assets, refer to Practice Note: PAYE—readily convertible assets, intermediaries and jurisdictional scope.

An important principle in this area is that all securities are treated as readily convertible assets—irrespective of whether they would otherwise qualify—unless they are shares for which a corporation tax deduction is available...

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Web page updated on 22/05/2026

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