How RSUs Are Taxed in the UK
Restricted Stock Units (RSUs) are a form of equity compensation. In the UK, they are treated as employment income at the point of vesting. The full market value of vesting shares (or cash) is added to your income for that tax year and PAYE is applied by your employer.
Unlike SAYE or EMI options, there is no Income Tax exemption on RSU gains — the entire market value at vesting is taxable. However, any subsequent appreciation in share value after vesting is subject to CGT rather than Income Tax, at the potentially lower CGT rates.
RSU Tax at a Glance — 2025/26
| Tax | Rate | Applies to |
|---|
| Income Tax | 20% / 40% / 45% | Full market value on vesting date |
| Employee NI | 8% (below UEL) / 2% (above UEL) | Full market value on vesting date |
| Employer NI | 13.8% | Full market value (cost to employer) |
| CGT on disposal | 10% / 20% | Gain above vesting-day market value |
Sell-to-Cover Arrangements
Because RSU tax arises at vesting, employees often have no cash to pay the PAYE charge. Most employers operate a sell-to-cover (share withholding) arrangement: a sufficient number of shares are automatically sold at vesting to fund the Income Tax and NI, and the remaining shares are delivered to the employee's account.
Frequently Asked Questions — RSU Tax UK
How are RSUs taxed at vesting in the UK?
The market value of shares on the vesting date is treated as employment income. Income Tax is charged at your marginal rate (20%, 40%, or 45%) and Employee NI at 8% (or 2% above the UEL) applies in addition.
What is 'sell to cover' withholding?
Your employer may automatically sell a portion of your vesting shares and use the proceeds to pay your Income Tax and NI through PAYE. The remaining shares are delivered to you. This calculator lets you enter the shares withheld to show the net shares retained.
What is the base cost for CGT when I sell RSU shares?
The market value per share on the vesting date is your CGT base cost. Any gain above that price is subject to CGT at 10% (basic rate taxpayer) or 20% (higher rate taxpayer) at current 2025/26 rates.
Does employer NI affect my net pay?
Employer NI (Class 1 Secondary, 13.8%) is a cost to the employer, not the employee. However, some plans include 'joint election' arrangements that transfer the employer NI liability to the employee. Check your plan documents.
How do I know my NI rate if I am near the Upper Earnings Limit?
If your total annual earnings (salary plus RSU value) exceed approximately £50,270 in 2025/26, the portion above the UEL is subject to only 2% NI. This calculator asks whether you are already over the UEL to apply the correct rate.
What if RSUs vest across multiple tax years?
Each vesting event is a separate taxable event. You add the RSU employment income to your earnings for that tax year. Running separate calculations for each vesting tranche gives the most accurate result.
Can I put RSU shares into a pension via salary sacrifice?
RSU income at vesting cannot be salary-sacrificed because it is not salary. However, you could make additional pension contributions to offset the tax impact in the same year, reducing your adjusted net income and potentially restoring personal allowance if lost.
What happens if the RSU vests but I cannot sell the shares?
Tax and NI are still due at vesting even if there is a holding restriction preventing immediate sale. Employers typically run a 'cashless sell' arrangement to fund the PAYE charge without requiring the employee to find cash from other sources.
Are RSUs from overseas employers subject to UK PAYE?
If you are UK resident and employed in the UK, yes — even if the RSUs come from a US or other non-UK parent company. The UK employer is responsible for PAYE. If there is no UK employer entity, you may need to self-report and pay tax directly.
How does the annual CGT exempt amount apply to RSU disposals?
You can offset up to £3,000 of capital gains (2025/26) against the CGT annual exempt amount. If your RSU shares have risen in value since vesting and you sell within your £3,000 exemption, no CGT is payable on that disposal.
What is the tax treatment if RSUs are settled in cash rather than shares?
Cash-settled RSUs are treated identically — the cash received at vesting is employment income subject to Income Tax and NI through PAYE. No CGT arises as there are no shares to dispose of.
Do RSUs affect my Child Benefit tax charge?
Yes. RSU employment income increases your adjusted net income. If this takes you above £60,000, the High Income Child Benefit Charge applies. Above £80,000, Child Benefit is fully clawed back. Additional pension contributions can reduce adjusted net income.
What is the typical vesting schedule for UK RSUs?
Most RSU plans vest over 3 to 4 years, often in quarterly or annual tranches. Each tranche is a separate taxable event. Some plans have cliff vesting (all shares vest at once after a qualifying period).