Introduction: What PISCES Shares Mean for Americans in Britain
PISCES shares are shares in a private company that are admitted to trading on a PISCES platform, the UK's new regulated market for intermittent trading in private company stock. PISCES stands for the Private Intermittent Securities and Capital Exchange System. It lets founders, employees and early investors sell during short, company-controlled trading windows, without a full stock market listing. For British shareholders, it is a welcome route to liquidity. For an American who holds private UK company stock, however, it creates a US tax event that the UK guidance never mentions.
The problem is simple to state. A US citizen or green card holder in London is taxed by the IRS on worldwide income, whatever HMRC decides. Consequently, selling PISCES shares can trigger US ordinary income, US capital gains tax, the net investment income tax and new reporting obligations, all alongside the UK position. Moreover, several of the UK tax reliefs designed to make PISCES attractive have no US equivalent at all.
This guide explains how the market works in 2026, how HMRC taxes a sale, and what the same sale looks like on your US return. At TaxYork, we prepare US and UK returns for founders, senior employees and investors in British growth companies, so we see these liquidity events from both sides.
What PISCES Shares Actually Are
The legal framework is a financial markets infrastructure sandbox created under the Financial Services and Markets Act 2023. HM Treasury's regulations took effect on 5 June 2025, the FCA published its final rules on 10 June 2025, and the sandbox runs until 5 June 2030. A private company chooses to join, decides when trading windows open, and can set minimum and maximum prices and volumes.
Only certain investors can buy PISCES shares. These are institutional investors, the company's own employees and officers, and individuals who qualify as high-net-worth or sophisticated investors. Therefore, the market suits exactly the kind of client we advise: wealthy, experienced and often cross-border.
Why the American Position Differs
A British seller asks one question: how much capital gains tax is due? An American seller must also ask how the IRS characterises the receipt, whether the UK tax will be creditable, and which US forms the holding requires. Furthermore, the answer changes depending on whether you acquired the shares through an employee option, as a founder, or as an outside investor buying on the platform. As a result, the same trading window can produce three very different US outcomes.
How PISCES Works in 2026
PISCES has moved quickly from framework to live trading. Understanding the mechanics helps you plan the tax on both returns.
The Operators and the First Trades
Three operators now hold FCA approval. JP Jenkins and the London Stock Exchange were approved in the second half of 2025, and Asset Match followed in April 2026. On 24 February 2026, QPlay Ltd became the first company to trade on a PISCES platform, via JP Jenkins. The London Stock Exchange's platform, the Private Securities Market, received its FCA approval in August 2025 and held its first trading event for PISCES shares on 25 March 2026. According to the FCA's announcement of the first PISCES operator, the regime is designed as a stepping stone between private funding and a public listing.
Since then, larger names have used the market for employee liquidity. In July 2026, the autonomous driving company Wayve reportedly ran an employee share sale worth around $85 million through the Private Securities Market. Consequently, many American employees of UK technology companies now hold, or will soon hold, shares that can be sold this way.
Trading Windows and Company Control
Unlike a listed market, trading happens only during windows the company opens, usually as an auction. The company decides which investors may take part, can restrict who buys, and discloses information to eligible investors rather than the public. Additionally, companies can cap the price range and the volume sold, which keeps control of the shareholder register.
For sellers, this means you cannot choose your moment. You sell when the company opens a window, at the price the auction clears. Therefore, US tax planning around PISCES shares often means planning around the company's timetable, not your own.
Stamp Duty and the Buyer's Saving
A normal transfer of private company shares costs the buyer 0.5% stamp duty. However, the PISCES stamp duty exemption regulations, in force from 3 July 2025, exempt the transfer of PISCES shares traded on a PISCES platform from all stamp duties. The saving benefits the buyer directly and, indirectly, the price the seller achieves. There is no US equivalent to account for, because the United States does not tax share transfers in this way.
PISCES Versus a Private Tender Offer
Before PISCES, the main route to liquidity for private company employees was a one-off tender offer or secondary sale arranged by the company. Those still happen. However, a tender offer is a single negotiated transaction, usually with one buyer, while PISCES shares trade through a regulated, repeatable auction open to a wider pool of eligible investors. The US tax analysis is broadly similar for the seller, as our guide to tender offer tax for Americans in London explains. Nevertheless, PISCES brings the stamp duty exemption, the readily convertible asset rules and the new EMI and CSOP exercise event, none of which applies to a conventional tender offer. Consequently, the paperwork you received for an earlier tender offer is not a safe template for a PISCES trading window.
How HMRC Taxes a Sale of PISCES Shares
HMRC published a detailed technical note on PISCES in March 2025 and updated it in November 2025. The HMRC technical note on employees trading PISCES shares sets out the rules below.
Capital Gains Tax on the Sale
In most cases, selling PISCES shares is an ordinary disposal for capital gains tax. For 2026-27, the higher rate of capital gains tax is 24%, with an annual exempt amount of £3,000. Where you qualify, Business Asset Disposal Relief reduces the rate to 18% on up to £1 million of lifetime gains, as GOV.UK's guide to Business Asset Disposal Relief explains.
For employees, the usual 5% shareholding test for that relief is a hurdle. However, shares acquired through Enterprise Management Incentive options escape the 5% test, and the 24-month holding period runs from the date of the option grant. Consequently, many EMI holders selling on PISCES pay 18% rather than 24%. Any amount already taxed as employment income is not taxed again as a gain.
Readily Convertible Assets and PAYE
HMRC confirmed that PISCES counts as a trading arrangement. Therefore, where arrangements exist for shares to trade on PISCES when an employee acquires them, those shares are readily convertible assets, even if no trading window is open at the time. Shares acquired in anticipation of admission to PISCES are caught too.
This matters because employment income on readily convertible assets goes through PAYE, with Class 1 National Insurance. So an employee who acquires shares through an unapproved option or a restricted share award, rather than a tax-advantaged scheme, will see income tax and National Insurance deducted through payroll. The Employment Related Securities Manual covers the underlying rules.
EMI and CSOP Options Exercised at a PISCES Event
Tax-advantaged options normally lose their relief if the company changes when they can be exercised. However, legislation in Finance Bill 2025-26 allows EMI and Company Share Option Plan agreements granted before 6 April 2028 to be amended, on or after 15 May 2025, so that a sale on PISCES becomes an exercise event. The amendment is treated as if it were in the option from grant, provided the shares are sold on PISCES as soon as reasonably practicable after exercise.
The company must agree the change with you in writing or notify you in writing. Importantly, a general discretion clause is not enough. For CSOP, the three-year holding rule still applies. For UK purposes, an EMI option exercised at a PISCES event therefore produces no income tax and no National Insurance at exercise, and the whole growth falls into capital gains tax on the sale.
Valuation After a PISCES Event
HMRC says it will not normally disturb the price of a PISCES trade between unconnected parties, which it treats as market value. However, past PISCES prices become evidence of value for later events, including new EMI and CSOP grants. As a result, a company whose PISCES shares traded at a high price may find that minority discounts are no longer appropriate when it values new option grants. There is no advance assurance mechanism for PISCES values.
The US Side for Employees: Options and Share Awards
For an American employee, the UK reliefs above do not carry across the Atlantic. The US tax treatment of your PISCES shares depends mainly on how you acquired them.
EMI and CSOP Options Are Non-Qualified Options
The IRS does not recognise EMI or CSOP relief. For US purposes, these options are generally non-qualified stock options under section 83 of the Internal Revenue Code. Accordingly, when you exercise, the spread between market value and the exercise price is ordinary compensation income, taxed at up to 37%. Our guide to EMI share options for Americans in Britain explains this in depth, including why the new 15-year EMI exercise period rules out incentive stock option treatment.
Britain, by contrast, taxes nothing at an EMI exercise. So the US charges income tax on the spread, while the UK charges capital gains tax on the same growth when you sell. That character mismatch is the central US problem with employee PISCES shares.
Why Same-Day Exercise and Sale Helps
Before PISCES, the typical EMI problem was timing. You exercised in one year, paid US tax immediately, and sold years later, paying UK tax that arrived too late to credit. However, the PISCES amendment requires the sale to follow exercise as soon as reasonably practicable. Consequently, the US compensation income and the UK capital gains tax now usually fall in the same tax year.
In our experience, that alignment makes the UK tax far more usable. The US regulations assign a foreign tax to the US income group it is imposed on, so UK capital gains tax on a same-day exercise and sale generally follows the compensation income into the general category on Form 1116. The IRS guidance on the foreign tax credit explains the basket rules. Nevertheless, at 18% or 24%, the UK tax rarely covers a 37% US charge, so some US tax usually remains.
Unapproved Options and Restricted Shares
Where your PISCES shares came through an unapproved option, the UK and US both tax the spread as employment income at exercise. In that case, the PAYE deducted in Britain is directly creditable against the US tax on the same compensation, subject to the usual limits. However, UK employer National Insurance is not creditable, and employee National Insurance is governed by the US-UK totalisation agreement instead. Our article on employment related securities and US tax covers restricted shares and the UK section 431 election.
Sourcing the Income
Compensation from options is sourced by where you performed the services between grant and vesting. If you worked in London throughout, the income is foreign-source and the UK tax is creditable. However, if you spent part of the period working in the United States, part of the income is US-source, and the UK tax on that part may not be creditable. Consequently, workday records matter as much as the share price.
The US Side for Founders and Outside Investors
Founders and investors face different US rules from employees. Moreover, Americans buying on the platform face a trap that sellers never meet.
Founders Selling in a Trading Window
For a founder, selling PISCES shares is normally a capital gain for US purposes, taxed at up to 20% plus the 3.8% net investment income tax. Under section 865(g)(2) of the Internal Revenue Code, a US citizen living abroad treats the gain as foreign-source only if UK tax of at least 10% of the gain is actually paid. At 18% or 24%, UK capital gains tax usually clears that test. However, the annual exempt amount, capital losses or other reliefs can push the UK tax below 10% of the US gain, which makes the gain US-source and the credit disappears.
If you own 10% or more of a UK company that is a controlled foreign corporation, section 1248 can also turn part of the gain into a dividend. Our guide to Business Asset Disposal Relief and US tax walks through the founder numbers.
Buying PISCES Shares: The PFIC Trap
Americans who buy on PISCES need to look closely at what they are buying. The London Stock Exchange's first trading event offered shares in a Tradable Private Equity Investment Company, whose only asset was a stake in another investment company. A vehicle like that is very likely to be a passive foreign investment company for US purposes.
PFIC status brings annual Form 8621 filings and punitive excess distribution rules on sale. Furthermore, the usual escapes may be unavailable. A qualified electing fund election needs an annual information statement the company may not provide, and the mark-to-market election requires stock that is regularly traded on a qualified exchange, which intermittent PISCES auctions are unlikely to satisfy. The IRS instructions for Form 8621 set out the regime. Therefore, never buy an investment-holding vehicle on PISCES without a PFIC review first.
Operating Companies and Form 5471
Shares in a genuine trading company are not PFIC stock simply because they are PISCES shares. However, if your holding reaches 10% of the vote or value, you may need to file Form 5471. Our guide to directly held foreign stock and Form 8938 explains the separate reporting thresholds that apply at lower holdings.
Reporting PISCES Shares on Your US Return
A sale is the most visible event, but holding PISCES shares also carries continuing US reporting. Missed reporting here is one of the most common problems we fix for Americans in UK growth companies.
Form 8938 and the FBAR
Shares in a UK company that you hold directly are specified foreign financial assets for Form 8938, even though they are not in a bank or brokerage account. Unexercised options over UK company shares count too. For a single filer living abroad, Form 8938 applies once foreign assets exceed $200,000 at year end or $300,000 at any time, as the IRS Form 8938 guidance explains.
Directly held shares are not FBAR items. However, if you hold your PISCES shares through a nominee or broker account in Britain, or receive the sale proceeds into a UK account, that account is reportable on the FBAR once your foreign accounts together exceed $10,000. The FinCEN FBAR guidance sets out the rules, and our FBAR and FATCA compliance service handles both forms.
Form 8949, Currency and Basis
You report a sale of PISCES shares on Form 8949 and Schedule D. Proceeds and basis must be converted into US dollars, using the rate on the relevant dates, not a single annual average. Additionally, for option shares, your US basis includes the compensation income already reported. Failing to add it is the most common reason Americans pay US tax twice on the same gain. Our US tax returns for expats service reconciles the UK payroll and share scheme records to the US basis.
Estimated Tax After a Liquidity Event
A large sale of PISCES shares can create a US liability well above your usual withholding. Because UK payroll does not withhold US tax, you may need to make a US estimated tax payment for the quarter of the sale. Our guide to estimated taxes for Americans abroad explains how to avoid the underpayment penalty.
Case Study: An EMI Holder in a PISCES Trading Window
The following illustrative case study shows how a sale of PISCES shares works on both returns for an American employee. The names and some details are changed, but the numbers reflect the cases we see.
The Facts
Jordan is a US citizen who has lived in London since 2019 and works as a vice president of engineering at a British artificial intelligence company. In 2021, Jordan received EMI options over 40,000 shares at an exercise price of £1.50, which matched the unrestricted market value agreed at grant. In 2026, the company amended its EMI agreements in writing to add a PISCES sale as an exercise event.
At the company's trading window in August 2026, the auction cleared at £22.50 per share. Jordan exercised 20,000 options and sold the shares immediately. The proceeds were £450,000 and the exercise price was £30,000, a gain of £420,000.
The UK Result
Because the options were qualifying EMI options exercised under the amended terms, there was no income tax or National Insurance at exercise. The £420,000 gain was subject to capital gains tax. After the £3,000 annual exempt amount, Business Asset Disposal Relief at 18% applied, since EMI shares escape the 5% test and the grant was more than 24 months earlier. Jordan's UK capital gains tax was therefore £75,060.
The US Result
For US purposes, the £420,000 spread was compensation income at exercise, worth about $562,800 at the exchange rate on the day. Jordan's basis in the shares equalled their value, so the same-day sale produced no further capital gain. At the 37% marginal rate, the US tax on the compensation was about $208,200.
Because exercise and sale fell in the same year and Jordan worked in London throughout, the UK tax of £75,060, about $100,600, was creditable against that US tax in the general category. Consequently, Jordan owed about $107,600 of US tax after the credit, which we paid as an estimated payment in the same quarter to avoid an underpayment penalty.
What We Fixed Along the Way
Jordan had never reported the EMI options on Form 8938. We added them to the current return and reviewed whether earlier years needed correction. We also confirmed that the option had been granted at unrestricted market value, which kept it outside the section 409A discounted option rules. Finally, we reported the UK account that received the proceeds on the FBAR.
How TaxYork Can Help
Selling PISCES shares is a liquidity event on two tax systems at once, and the UK reliefs that make the market attractive often do nothing for the US return. We provide comprehensive US and UK tax preparation for founders, employees and investors in British private companies.
Before the Trading Window
We model the UK and US tax on each option or share tranche before you commit to sell, including the foreign tax credit and the estimated payment you will need. In particular, we check whether your EMI or CSOP agreement has been validly amended, whether Business Asset Disposal Relief applies, and whether the 10% sourcing test is met. For investors, we review any vehicle on the platform for PFIC status before you buy.
After the Sale
We prepare the UK Self Assessment and the US return that report the sale consistently, including Form 8949, Form 1116, Form 8938, Form 8621 where needed, and the FBAR. Where earlier years missed reporting of options or shares, we correct them. Consequently, you finish the trading window with both returns aligned and nothing left for the IRS to find.
Conclusion
PISCES gives shareholders in private UK companies a genuine route to liquidity, free of stamp duty and with welcome UK relief for EMI and CSOP holders. However, for Americans, PISCES shares carry a separate US story. EMI and CSOP options become ordinary compensation for the IRS, founders must check the 10% sourcing test, and investors buying on the platform can walk straight into the PFIC regime.
Therefore, plan every trading window on both returns. Confirm how your shares or options will be taxed in each country, make the right estimated payment, and keep your Form 8938 and FBAR reporting current. Handled that way, selling PISCES shares becomes a clean liquidity event rather than a cross-border problem.
Contact Us
If your company is joining PISCES, or you plan to buy or sell in a trading window, speak to us before the window opens. Contact us to arrange a confidential consultation with our US-UK specialists. You can also email hello@taxyork.com or call 020 3488 8606.
Disclaimer
This article provides general information about PISCES shares for US citizens, green card holders and other cross-border shareholders in private UK companies. It does not constitute tax, legal or investment advice for your specific circumstances, and it is not a recommendation to buy or sell any security. UK and US tax rules change frequently, and the case study is illustrative only. You should obtain professional advice based on your own facts before acting. TaxYork accepts no liability for decisions taken on the basis of this article alone.