Proceeds of share option sale immediately after exercise

Hello I have share option in my employers US company. These are non qualified share options I exercised some options and the company bought the shares back immediately I understood that 1- the difference between the exercise price and the fair market value is employment income 2- the difference between the fair market value and the price paid for the shares would be a capital gain However, my employer says the entire spread between the exercise price and price paid is employment income because the share options were exercised and sold immediately Is this correct?

Hi,
You can see guidance here:
Tax and Employee Share Schemes
Thank you.

Hello, The guidance isn’t very clear. My employer processed it through payroll, and I’ve already paid a significant amount of income tax. Would I need to declare a capital gain?

Hi,
Only if you retain the shares after vesting and then dispose of them for a profit.  
Please have a look at helpsheet HS305 -
HS305 Employment-related shares and securities — further guidance (2025).
Thank you.