RSU Tax Calculator UK 2025/26

RSU Tax Summary — 2025/26 Rates

How RSUs Work in the UK — A Complete Guide

What Are RSUs (Restricted Stock Units)?

Restricted Stock Units are a form of equity compensation awarded by employers — particularly common at technology companies, US-listed multinationals, and fast-growing UK scale-ups. When you are granted RSUs, you receive a promise to receive actual shares in the future, subject to a vesting schedule and (sometimes) performance conditions. Unlike share options, you pay nothing to acquire RSUs — they are granted at no cost to the employee.

A typical vesting schedule is 4 years with a 1-year cliff, meaning 25% of shares vest after 12 months and the remainder vest quarterly or monthly thereafter. Until vesting, you have no ownership rights — you cannot vote, receive dividends, or sell the shares.

The Three Stages of RSUs: Grant, Vest, Sell

Grant: Your employer awards you a number of RSUs. At this point, there is no tax liability whatsoever. The grant date and number of shares are recorded in your employment contract or equity award agreement. No income tax, no NI, no CGT at grant.

Vest: On the vesting date, your RSUs convert to real shares and are delivered to you (or their cash equivalent if a same-day sale is arranged). This is the key tax event. HMRC treats the full market value of shares on the vesting date as employment income — taxed at your marginal rate via PAYE or self-assessment. Employee NI is also due at 8% on earnings up to £50,270 and 2% above. Your employer will also pay Employer NI at 15% on the amount above the secondary threshold (£5,000 for 2025/26).

Sell: Once shares vest, you can hold them or sell immediately. If you sell at the vesting price there is no further tax (your gain is zero). If the share price rises after vesting, the profit above the vesting price is a capital gain subject to CGT at 18% (basic rate) or 24% (higher/additional rate), after the £3,000 annual CGT exemption for 2025/26.

UK Tax Treatment of RSUs Under Schedule E

HMRC treats RSU income as employment earnings under Part 7 of ITEPA 2003 (Income Tax (Earnings and Pensions) Act). This means the value of shares received on vesting is an "employment-related securities" event and is fully subject to income tax at your marginal rate. It does not benefit from Capital Gains Tax rates at vesting — even if the shares have appreciated significantly since the grant date.

This is a critical distinction: the entire value at vesting is income, not a capital gain. Only post-vesting appreciation becomes a CGT matter.

Sell-to-Cover: How Employers Handle RSU Tax

Most major employers — particularly those with US-listed stock — operate a "sell-to-cover" mechanism. On the vesting date, the broker automatically sells a sufficient number of your newly vested shares to cover the income tax and NI due. You receive the remaining shares net of this withholding. Some employers offer a "cash settlement" option instead, where you receive cash equal to the share value minus tax, rather than shares.

Even where sell-to-cover applies, it is your responsibility to ensure the correct amount has been withheld. If your employer under-withholds (for example, because they don't know your full income picture), you must make up the difference through self-assessment.

The 90-Day Rule for US Company RSUs

If your RSUs were granted while you were outside the UK and you subsequently moved to the UK, HMRC applies a time-apportionment rule to determine what proportion of the RSU gain is UK-sourced. The calculation is: (days worked in UK from grant to vest) ÷ (total days from grant to vest). Only this apportioned amount is subject to UK tax. This is commonly referred to informally as the "split-year" or "international mobility" rule and is particularly relevant for employees who relocated from the US, EMEA, or other regions.

Self-Assessment and HMRC Reporting

You will typically need to file a self-assessment tax return in the year your RSUs vest if: you earn over £100,000; your employer does not operate PAYE for RSU income; you hold shares after vesting and later sell them (to report CGT); or you have received RSU income from a non-UK employer. Your employer is required to report RSU awards and vestings to HMRC annually via the Employment Related Securities (ERS) annual return by 6 July following the end of each tax year.

Double Tax Treaty Considerations

If you have worked in multiple countries during the RSU vesting period, double tax treaties may reduce or eliminate UK liability on the non-UK portion of the award. The UK has tax treaties with over 130 countries. Common scenarios include UK employees seconded to the US, or US employees on L1/O1 visas who move to the UK. The treaty applies to prevent double taxation of the same income in both jurisdictions. Specialist advice from an international tax accountant is strongly recommended in these situations.

RSU vs EMI Options vs ESPP: Tax Comparison

RSUs are the least tax-efficient equity compensation vehicle compared to EMI options or CSOPs — but they are far more commonly awarded by large listed companies that cannot access HMRC-approved schemes due to size or listing requirements.

Strategies to Reduce RSU Tax Liability

Pension contributions: Making additional pension contributions in the year of vesting reduces your adjusted net income. If your salary plus RSU value would push you into the higher rate band or over £100,000, increasing pension contributions can keep you in the basic rate band or restore your personal allowance.

ISA sheltering: Once shares vest, selling them and immediately investing the proceeds in a Stocks and Shares ISA shelters future growth from CGT entirely. The annual ISA limit is £20,000 for 2025/26.

Spousal transfer: Shares transferred between spouses are CGT-free. Each spouse then has their own £3,000 CGT annual exemption and, if they are a basic-rate taxpayer, pays only 18% CGT versus your 24%.

Timing vesting events: Some companies allow you to elect an accelerated or deferred vesting date within limits. If you expect to have lower income in the following year (e.g., due to career break or reduced hours), deferring RSU vesting may save tax.