Section 431 Elections – A Simple Guide

What is a section 431 election?

A section 431 election is a tax form that an employee and their employer can sign when the employee gets shares (or similar investments) in connection with their employment, to reduce the risk of paying PAYE income tax and NICs on them later under the UK's ‘restricted securities' tax rules. It's most commonly signed when employees get shares as part of their pay or as a reward, including through share options.

Why do these tax rules exist?

The UK has a set of special tax rules called the “restricted securities” rules. These rules were created to stop employees from avoiding tax by getting shares with restrictions that lower their value, and then later removing those restrictions (or selling them for a price that doesn't take into account any restrictions) to get a tax-free benefit.