Global Equity

United Kingdom | Net settled stock awards: change to employer reporting

Summary

HMRC have revised their instructions on how employers should be reporting net settled stock awards in their annual Employment-Related Securities return, in order to simplify the process for employers.

The detail

What are net settled stock awards?

These are awards where the employer uses their own cash to fund any employer payroll withholdings (like PAYE and employee National Insurance) due from the employee, and issues a net number of shares to the employee. Awards where shares are sold to cover these payroll withholdings are not net settled.

What’s the change in employer reporting?

HMRC has just published their Employment-Related Securities Bulletin 69, containing a change to its instructions on how employers should report net settled share awards in their UK end of year Employment-Related Securities returns. This change will be effective for reports submitted in April 2026 onwards.

The previous instructions involved the employer reporting the net shares acquired and the cash settled portion on two separate rows of the end of year return.

The new guidance uses only one row, reporting:

• The full number of shares (before any net settlement reduction) for Q31 “total number of securities employee entitled to on exercise of the option before any cashless exercise or other adjustment”
• The exercise price paid per share, if any, for Q32 “if consideration was given for the securities, the amount given per security”
• The market value per share for Q33 “if securities were acquired, market value (see note in guidance) of a security on the date of acquisition”
• “Yes” for net settlement cases for Q38 “if securities were not acquired, was money or value received on the release, assignment, cancellation or lapse of the option?”
• The cash value of shares withheld for taxes (but not shares withheld for the exercise price) for Q39 “if yes, amount of money or value received”

There is no change to the reporting of awards where shares are sold to cover taxes.

HMRC says that this change is part of an ongoing evaluation to identify process simplifications and reduce the administrative burden for employers. We agree that this should reduce the size of the end of year report, and make it easier to reconcile to source data.

Employers with net settled awards should review their data processing to ensure that reports submitting from April 2026 conform to the revised instructions. Employers who are unsure whether their awards are net settled or not should investigate.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Gemma Ludwig
Partner, Global Equity and Reward

John Pritchard
Senior Manager, Global Equity and Reward

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