HMRC update on Employee-Related Securities (ERS): UK
 

At a glance

HMRC has introduced automatic penalties for late 2025-26 ERS returns and will also modernise ERS templates from November 2026, effective April 2027, with no change to underlying reporting requirements.

Any company that gives shares or share options to an employee or director in the 2025-26 tax year and is already registered with an ERS scheme with HMRC must file an ERS return annually. HMRC has introduced two key developments in Agent Update Issue 147 that employers, payroll teams and tax professionals should act on immediately. These involve stricter enforcement of end-of-year return penalties and upcoming accessibility improvements to ERS return templates.

Introduction of automatic penalties for late submission

The deadline for submitting 2025-26 ERS end-of-year returns was 6 July 2026. HMRC has reminded employers that returns must be submitted even when there are no reportable events, as a nil return may still be required.

The penalties are: -

• A GBP 100 penalty is automatically applied if the end-of-year ERS return or nil return is not submitted by 6 July 2026.
• An additional GBP 300 penalty applies if the return is still outstanding as of 6 October 2026.
• A further GBP 300 penalty applies if the return is still outstanding as of 6 January 2027.

Our Comments Employee share schemes remain a valuable tool for attracting and retaining talent. However, administrative compliance is just as important as the scheme itself. The automatic penalty HMRC levies on ERS annual returns is a straightforward measure to ensure compliance with tax reporting obligations. The penalty structure is designed to encourage timely filing and to protect the tax-favored treatment of share options.

Accessibility improvements to be introduced in ERS templates

In a welcome move toward a more user-friendly reporting experience, HMRC has announced that it is modernizing ERS end-of-year return templates, guidance, and technical notes to improve accessibility and usability. The new template versions will be published by HMRC in November 2026 and will become effective from April 2027. This transition period is intended to give employers and software providers sufficient time to adapt their internal systems and any customized reporting templates.

The updated templates will:

• Improve accessibility for users by simplifying sheet titles, formatting sheets as tables with appropriate headers, removing abbreviations, standardizing fonts and removing line spacing between question numbers and questions.
• Simplify the completion process.
• Remove guidance notes and replace them with links to relevant GOV.UK guidance.
• Support a better digital reporting experience for employers, agents and software providers.