Granting US stock options to UK employees: get it right
TL;DR
UK tax treatment of US stock options creates dry tax bills due to tax timing misaligned with liquidity.
Practical guidance on the UK tax treatment when US companies grant options to UK employees. Explains the 'unapproved' option treatment and its tax implications that create the dry tax bill problem.
Key Findings from Smith (2025)
- US options to UK employees typically treated as unapproved options
- Income tax due at exercise on spread between exercise price and FMV
- National Insurance may also apply
- Tax timing misaligned with liquidity creates cash flow challenges