Tax on RSUs

sst1234

Apologies if this question has been asked before, no doubt others find this subject as confusing as I do so I’m looking for guidance from those that have some insight.

I have restricted RSUs with US employer, which are taxed at 50% upon vesting. Effectively 50% of the stock is deducted from the vested number of shares at that time.

I filled out W-8BEN form at the time of signing up for the RSUs.

My questions is, should the RSU deduction amount be 50%? Since I am a higher rate UK tax payer, 50% seems to be the wrong amount. I thought that filling out W-8BEN would ensure that correct tax was paid.

Thanks in advance.

EdSwippet

sst1234 wrote: »

My questions is, should the RSU deduction amount be 50%? Since I am a higher rate UK tax payer, 50% seems to be the wrong amount. I thought that filling out W-8BEN would ensure that correct tax was paid.

The W-8BEN should ensure that no US tax is withheld or paid, but doesn't do anything for UK tax and NI.

Withholding 50% for UK tax plus NI sounds about normal to me. Employers deliberately over-withhold on this sort of thing, and then (usually) reconcile it with the real tax and NI due through a subsequent PAYE cycle. More detail in this thread from a few months ago.

ChuckMountain

Agree with Ed, W-8BEN stops you paying US tax.

To add though sometimes the employer will also expect you to pay their Employer NI contributions too so this can result in a higher amount that you would expect as you might think 42% when in total it could be around 55% deduction.

It should be trued up though via PAYE as it will just be considered as additional income. The vest price will be converted to pounds and added to your taxable income. Just be careful this does not impact things such as Child Benefit etc.

Some companies\brokers will allow you to retain all the shares if you pay the ~50% in cash to them, which you may or may not want to do depending on your circumstances. The issue with this is if the share price is moving then you need to ensure you have enough money to cover if the share prices goes up that day. If there is not enough money then it reverts back to withholding 50% shares. A colleague missed out on that by a few dollars, unfortunately it cost him more moving the money around ...