RSUs: A tech employee’s guide to restricted stock units tax in the UK

Quick answer: RSUs (restricted stock units) are shares your employer promises to give you in the future. In the UK, you pay income tax and National Insurance when the shares vest, not when they are first promised. If you keep the shares and they rise in value, you may also pay Capital Gains Tax when you sell. For most people, selling immediately and reinvesting elsewhere is the safer choice. And if your income goes over £100,000, paying into a pension before 5 April can prevent a hidden 60% effective tax rate from applying to your RSU income.

What are restricted stock units (RSUs)?

You join a tech company and your offer letter promises a salary plus “100 RSUs.” You know it sounds valuable. But you may be less sure what it actually means, what you will be taxed on, or when.

Restricted stock units are a form of employee compensation paid in company shares. Your employer promises to give you shares on a future date, provided you are still employed when that date arrives. They are common at large technology companies, including Meta, Microsoft, Amazon, Intel and Google.

RSUs differ from share options. With an option, you have the right to buy shares at a fixed price. With an RSU, you receive the shares outright once they vest. There is no purchase price to pay. The value you receive is simply the market value of the shares on the day they become yours.

That market value at vesting is the figure that drives your tax bill. It is also the starting point for any Capital Gains Tax calculation if you hold the shares afterwards. Understanding this single number makes everything else easier to follow.

RSUs are classified by HMRC as employment-related securities. That means they fall under specific tax rules that govern how and when they are taxed, and how they must be reported. Over time, RSUs can become a significant part of your overall income and net worth. Understanding how they work, how they are taxed, and how to manage them strategically is essential to building and maintaining financial security.

RSUs are increasingly common in UK tech because they are straightforward to administer and easy for employees to understand. Unlike options, they always have some value as long as the share price is above zero. That makes them an effective retention tool, which is why you will find them in most large technology company compensation packages.

How do RSUs work?

RSUs are awarded to employees at key events. Many large technology companies grant RSUs to new employees upon joining. They may also be awarded annually, or depending on company performance. RSUs work in a similar way to other company share schemes.

There are two key dates that matter:

  1. The grant date is when the RSUs are awarded to you. No tax arises at this point.
  2. The vesting date is the day they actually become yours, when you receive the shares and can sell them. This is when tax is triggered.

Typically, RSUs vest in tranches rather than all at once. Say you join Microsoft in January 2021 and you are promised 100 RSUs over four years. Each year, a quarter of them vest: 25 shares after year one, 25 after year two, and so on.

For each additional year you work for the company, you may receive a further grant of RSUs. This creates a “vesting cliff” effect, where multiple grants are vesting simultaneously after several years of service.

How are RSUs taxed in the UK?

The core principle is straightforward. There is no tax when RSUs are granted. Tax arises only when they vest. On the vesting date, the shares count as employment income, just like your salary. You pay income tax and employee National Insurance contributions (NICs) on the market value of the shares that day. See HMRC’s Employment Related Securities manual for the technical basis.

The taxable amount is calculated as:

Market value per share on vesting date × number of shares vested = taxable employment income

This amount is added to your other earnings for the tax year. Your income tax rate depends on your total income. In 2026/27, the rates are 20% (basic rate), 40% (higher rate) and 45% (additional rate, on income above £125,140).

PAYE withholding: how tax is collected

In most cases, your employer collects the tax through PAYE (Pay As You Earn), the same system used for your salary. They sell a portion of your vesting shares to cover the tax due, then transfer the remaining shares to you. This is called “sell to cover.” You can choose to pay the tax from your own savings and keep all the shares, but you need the cash available on the vesting date to do so.

Even when your employer handles the tax through PAYE, you may still need to file a self-assessment return. We cover this in the section on reporting obligations below.

Employer National Insurance: the hidden extra cost

Employer’s National Insurance is normally paid by the company, not you. However, with RSUs, some employers pass this cost on to the employee through a joint election. If this applies to you, it creates an additional charge of 15% of the value of the vesting shares (the employer NIC rate for 2026/27).

This is worth checking in your RSU plan documents. If you do bear the employer NIC, it is deducted from the value of the shares before your income tax is calculated. Your own employee NIC is calculated separately on the full value.

Worked example: full tax calculation on a vesting event

Here is a realistic example using 2026/27 rates. Suppose you earn a base salary of £90,000 and 500 shares vest at £100 each, giving a vesting value of £50,000. Your employer passes the employer NIC cost on to you.

  • Vesting value: £50,000
  • Employer NIC (15% of £50,000): £7,500 — deducted first, reducing the net value to £42,500
  • Income tax on £42,500 (the value after the employer NIC, which is tax-deductible): about £22,400 (your total income of £140,000 crosses £100,000, where the personal allowance tapers away, and £125,140, where the 45% rate starts, so this income is taxed at 40%, then an effective 60%, then 45%)
  • Employee NIC at 2% on £50,000: £1,000 (the 2% rate applies above the upper earnings limit of £50,270)
  • Total deductions: about £30,900
  • Net shares received (via sell to cover): about £19,100 worth of shares

If your employer does not pass on the employer NIC, income tax is charged on the full £50,000 (about £25,800), total deductions are about £26,800, and you receive about £23,200 worth of shares. The difference is significant, which is why checking your plan documents matters.

The table below shows the tax on a £50,000 batch of shares for someone earning £150,000 who bears the employer NIC. All figures use 2026/27 rates.

RSU tax comparison table showing income tax, employee NIC and employer NIC on a £50,000 vesting event

Income tax and National Insurance rates correct as of tax year 2026/27.

How can I reduce tax on my RSUs?

Pension contributions and the 60% tax trap

The most powerful way to reduce income tax on your RSUs is to pay into a pension. Pension contributions reduce your adjusted net income, which is the figure HMRC uses to calculate your tax position. This matters most if your total income falls between £100,000 and £125,140.

Here is how the trap works. Once your income exceeds £100,000, you begin to lose your personal allowance, which is the amount you can earn tax-free (£12,570 in 2026/27). For every £2 you earn above £100,000, you lose £1 of that allowance. The result is that income in this band is effectively taxed at 60%: the normal 40% higher rate, plus an extra 20% from losing the tax-free allowance. This is sometimes called personal allowance tapering. (Source: GOV.UK income tax rates.)

Say you earn £100,000 in salary and receive RSUs worth £25,000, giving you a total income of £125,000. Without action, the full £25,000 of RSU income sits in the 60% band. A pension contribution of £25,000 brings your adjusted net income back to £100,000, moving all of that RSU income out of the danger zone entirely.

Every £1,000 left in that band costs you around £600 in tax. Acting before 5 April, the end of the tax year, is what makes the difference.

Salary sacrifice

Salary sacrifice is an arrangement where you agree to receive a lower salary in exchange for a higher employer pension contribution. Because the contribution comes from your employer rather than you, it reduces your gross pay before tax and NIC are calculated. This can be more efficient than a personal pension contribution, particularly for employee NIC savings. Ask your employer whether salary sacrifice is available under your pension scheme.

Timing vesting around the tax year

If you have any flexibility over when shares vest, or when you exercise choices within your RSU plan, timing can matter. Spreading vesting events across two tax years can keep your income below key thresholds in each year. This is not always possible, but it is worth discussing with a financial planner if you have a large grant approaching.

Not sure how your RSUs fit into your wider financial plan? Speak to Frazer James.

Do I pay Capital Gains Tax on RSUs?

If you sell your shares immediately on the day they vest, there is no Capital Gains Tax to pay. You have already been taxed on the market value at vesting, so selling at the same price leaves no additional profit to tax.

If you hold the shares and they rise in value before you sell, the increase is a capital gain. Capital Gains Tax (CGT) applies to that gain. If the gain exceeds the annual exempt amount, which is £3,000 per person in 2026/27, you owe tax on the excess.

For 2026/27, the CGT rates on shares are 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. These rates increased in the October 2024 Budget. Before that, the rates were 10% and 20% respectively. (Source: GOV.UK Capital Gains Tax rates.)

Even at the higher rates, CGT on shares sits well below income tax at 40% or 45%, and far below the 60% effective rate in the personal allowance taper band. That gap is the main reason to move shares into a tax-efficient account once you have paid income tax on them at vesting.

How can I lower Capital Gains Tax on my RSUs?

Sell immediately and use a bed-and-ISA strategy

Selling the shares as soon as they vest eliminates any capital gain. If you still want exposure to the shares, you can sell them and immediately repurchase the same shares inside a stocks and shares ISA. This is known as a bed-and-ISA. Future growth inside the ISA is free from CGT. Note that if the shares are in a US-listed company, dividend withholding tax may still apply inside an ISA. We cover this in the section on US withholding tax below.

Transfer shares to your spouse

Thanks to the inter-spousal transfer exemption, you can transfer shares to your spouse or civil partner with no immediate tax charge. Your spouse then sells the shares using their own annual exempt amount and, if applicable, their lower CGT rate. This effectively doubles the amount you can realise before CGT becomes payable. This is particularly useful if you have held shares since vesting and they have grown significantly in value.

Dividends and dividend equivalents on RSUs

Some RSU plans include a dividend equivalent feature. If the company pays a dividend during your vesting period, you receive a cash payment or additional shares equivalent to the dividend you would have received had you already owned the shares. This is common at large US companies such as Apple, Microsoft and Alphabet.

Dividend equivalents paid before vesting are typically treated as employment income, not dividend income. That means they are subject to income tax and NIC in the same way as the RSUs themselves. Once you own the shares after vesting, any dividends you receive are taxed as dividend income. In 2026/27, the dividend allowance is £500. Dividends above that are taxed at 10.75% (basic rate), 35.75% (higher rate) or 39.35% (additional rate).

If you hold shares in a US company, dividends are subject to US withholding tax before they reach you. We explain how to manage this in the next section.

US withholding tax and Form W-8BEN

Many UK tech employees hold RSUs in US-listed companies such as Amazon, Meta or Microsoft. When those companies pay dividends, the US government withholds tax before the money reaches you. The standard US withholding rate is 30%.

However, the UK and the US have a double taxation treaty. Under this treaty, the withholding rate on dividends paid to UK residents is reduced to 15%. To claim this reduced rate, you need to submit Form W-8BEN to your broker or share plan administrator. This form certifies that you are a UK tax resident and therefore entitled to the treaty rate.

If you do not submit Form W-8BEN, your broker will apply the full 30% withholding rate. You can claim credit for the excess withholding through your UK self-assessment return, but this creates extra administration. Submitting the form upfront is simpler.

Form W-8BEN is straightforward to complete. You provide your name, address, country of residence and tax identification number (your National Insurance number works for this purpose). Your broker or share plan administrator will tell you where to submit it. The form is typically valid for three years, after which you need to renew it.

If you hold shares inside a SIPP (self-invested personal pension), your pension administrator should handle the W-8BEN process. Check with them to confirm this is in place, as the withholding tax treatment inside a pension can differ.

How to report RSUs on your self-assessment tax return

Filing the return itself is your accountant’s territory, not ours. But the numbers on that return drive the planning decisions we help you with, so it is worth understanding what goes where.

Even when your employer collects tax through PAYE, you may still need to file a self-assessment tax return. HMRC requires you to file if your income from employment-related securities is not fully covered by PAYE, or if you have capital gains to report. Many tech employees with RSUs fall into one or both categories.

When do you need to file?

You need to file a self-assessment return if any of the following apply:

  • Your total income exceeds £100,000 in the tax year (RSU vesting can push you over this threshold).
  • You have capital gains above the annual exempt amount (£3,000 in 2026/27) from selling shares.
  • Your employer did not deduct the correct amount of tax through PAYE on your RSU income.
  • You received dividend income above the dividend allowance.
  • You are claiming additional pension contributions to reduce your adjusted net income.

What goes on the employment pages?

The income tax and NIC on your RSUs at vesting is employment income. It should appear on your P60 or P11D from your employer. On your self-assessment return, you report this on the employment pages (SA102). Check that the figure your employer has reported matches what you received. Discrepancies are common, particularly where employer NIC has been passed on to you.

What goes on the capital gains pages?

If you sold shares after vesting and made a gain, you report this on the capital gains pages (SA108). The base cost for CGT purposes is the market value at vesting, because you have already paid income tax on that amount. You are not taxed twice on the same value. Only the growth above the vesting price is subject to CGT.

Key deadlines

  • 5 April: End of the tax year. This is the deadline for pension contributions that reduce your adjusted net income for that year.
  • 5 October: Deadline to register for self-assessment if you have not filed before.
  • 31 January: Deadline to file your online self-assessment return and pay any tax owed for the previous tax year.
  • 31 July: Deadline for the second payment on account, if applicable.

If you miss the 31 January deadline, HMRC charges an automatic £100 penalty, with further penalties for continued delay. Filing on time, even if you cannot pay immediately, avoids the worst of these charges.

Where we fit alongside your accountant

We do not file tax returns. Your accountant does that, and a good one is worth keeping.

What we do is use those numbers to answer the planning questions that come next. How much of your wealth is now tied to one company’s share price. Whether a pension contribution is the right way to manage income above £100,000. How your equity fits a plan to retire earlier than you had assumed. Those decisions sit outside a tax return and they compound over years.

A note if you have worked outside the UK

This guide assumes you are UK resident and taxed here. That covers most people receiving RSUs from a UK employer.

If you have worked in more than one country during your vesting period, the position is different. Your RSU income may be split between countries under a double taxation treaty. The apportionment rules are genuinely complex and getting them wrong is expensive.

That work sits with a cross-border tax specialist rather than a UK financial planner. We would always recommend speaking to one before your RSUs vest.

What should I do with my RSUs?

Sell immediately or hold?

For most people, selling the shares as soon as they vest is the sensible default. You have already paid income tax on the full value. Holding on means taking on investment risk with money you have effectively already earned. If the share price falls after vesting, you lose real money that was already yours.

Concentration risk: the problem with holding employer stock

Holding RSUs means doubling down on your employer. You already rely on the company for your salary, bonus and career progression. Tying your savings to it as well concentrates all your financial risk in one place. This is called concentration risk. While this strategy can pay off in a rising market, it can be damaging when things turn. Employees at companies such as Coinbase and Peloton experienced this directly when their share prices fell sharply.

A simple test helps. If your employer handed you the value of the RSUs as a cash bonus, would you immediately use it to buy that much of the company’s stock? If the answer is no, that is a signal that selling and diversifying is likely the wiser choice.

Diversification and the bed-and-ISA approach

Once you have sold your vesting shares, reinvesting the proceeds in a diversified portfolio spreads your risk. Using a stocks and shares ISA shelters future growth from CGT. You can use the bed-and-ISA approach described earlier to move the proceeds into an ISA efficiently, subject to the annual ISA allowance of £20,000.

How RSUs fit into your broader financial plan

RSUs are one part of your overall financial picture. The right approach depends on your goals, your other savings, your tax position and your attitude to risk. A financial planner can help you make an intentional decision rather than a default one, and ensure your RSU strategy works alongside your pension, ISA and other investments.

Frequently asked questions about restricted stock units tax in the UK

When are RSUs taxed in the UK?

RSUs are taxed when they vest, not when they are granted. On the vesting date, the market value of the shares counts as employment income. You pay income tax and National Insurance on that amount, usually through PAYE.

Do I pay National Insurance on RSUs?

Yes. You pay employee National Insurance contributions on the value of your RSUs at vesting. Some employers also pass the employer NIC charge (15% in 2026/27) on to employees. Check your RSU plan documents to see whether this applies to you.

Do I need to file a self-assessment return for RSUs?

Possibly, yes. If your total income exceeds £100,000, if you have capital gains above £3,000, or if your employer did not deduct the correct tax through PAYE, you need to file a self-assessment return. The deadline for online filing is 31 January following the end of the tax year.

What is the 60% tax trap on RSUs?

If your total income falls between £100,000 and £125,140, you lose your personal allowance at a rate of £1 for every £2 earned above £100,000. This creates an effective marginal tax rate of 60% on income in that band. Paying into a pension can reduce your adjusted net income and avoid this trap.

Can I transfer RSUs to my spouse to reduce tax?

Yes. Once shares have vested and you own them, you can transfer them to your spouse or civil partner using the inter-spousal transfer exemption. No CGT is triggered on the transfer. Your spouse can then sell the shares using their own annual exempt amount and CGT rate.

What is a bed-and-ISA for RSUs?

A bed-and-ISA involves selling your vested shares and immediately repurchasing them inside a stocks and shares ISA. Future growth inside the ISA is free from Capital Gains Tax. You can invest up to £20,000 per tax year into an ISA.

What is Form W-8BEN and do I need it?

Form W-8BEN is a US tax form that certifies you are a UK tax resident. Submitting it to your broker reduces the US withholding tax on dividends from US-listed shares from 30% to 15%, under the UK-US double taxation treaty. If you hold shares in a US company, it is worth checking whether your broker has this form on file.

How is Capital Gains Tax calculated on RSUs?

Your base cost for CGT is the market value of the shares on the vesting date, because you have already paid income tax on that amount. CGT applies only to growth above that value. In 2026/27, gains above the £3,000 annual exempt amount are taxed at 18% (basic rate) or 24% (higher and additional rate).

What happens to RSUs if I leave my employer?

Unvested RSUs are typically forfeited when you leave. Some plans include “good leaver” provisions that allow a proportion of unvested RSUs to vest early, depending on the reason for leaving. Check your RSU plan documents or employment contract for the specific terms.

Can I use a restricted stock units calculator to work out my tax?

Online RSU tax calculators can give you a rough estimate, but they rarely account for all the variables: employer NIC pass-through, the personal allowance taper, pension contributions, or your full income picture. For an accurate figure, it is worth speaking with a financial planner or tax adviser who can model your specific situation.

How can we help?

RSUs are a valuable part of your financial picture, but they are just one piece of the puzzle. At Frazer James, we work with tech professionals to help them make the most of their RSUs, whether that means reducing tax, managing concentration risk, or integrating RSU income into a broader financial plan.

If you would like to talk through your situation, we offer an initial consultation without cost or commitment. There is no pressure and no obligation. It is simply a conversation about where you are and what might help.

Book a consultation with Frazer James to discuss your RSU tax planning

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Frazer James Financial Advisers is an Independent Financial Advisor in Bristol, Clifton. About us: Frazer James Financial Advisers is a financial adviser in Bristol. We can provide independent and unbiased financial advice as an independent financial adviser. We provide independent financial advice, pension advice, investment advice, inheritance tax planning and insurance advice. If you want to speak to a Financial Advisor, we offer an Initial Financial Consultation without cost or commitment. Meetings are held either at our offices, by video or by telephone. Our telephone number is 0117 990 2602. Frazer James Financial Advisers is located at Square Works, 17–18 Berkeley Square, Bristol, BS8 1HB.

This article provides information about investing but not personal advice. If you are not sure which investments are suitable for you, please request advice. Remember that investments can go up and down in value; you may get back less than you put in.

This article provides general information about RSUs and UK taxation and does not constitute personal financial advice. Tax treatment depends on individual circumstances and may change. All rates shown are for the 2026/27 tax year and sourced from GOV.UK. Frazer James Limited is authorised and regulated by the Financial Conduct Authority (FCA no. 834451). You can verify this on the FCA register.