RSU taxation rules in the UK

Kamala

Hi,
I have a question regarding taxation rules and RSU. I work for a US company that has an office in London. As part of my package this year I got number of RSU. Once vested, how much tax will I pay if I sell them? I always thought that it would be capital gain tax, however some of my colleagues think it would be taxed as standard income. 

Thanks,
K

EdSwippet

It works like this:

1. On grant: no tax consequences.
2. On vesting: ordinary PAYE income tax and NI (and perhaps also employer's NI) on the share price multiplied by the number of shares received. Treated as salary, then.
3. On sale: capital gains tax on the difference between the share price on vesting and the share price on sale, multiplied by the number of shares sold. 

Wrinkles. On vesting, the employer normally auto-sells some shares to cover tax and NI, perhaps withholding 50-60% of the shares, rounded up to the next whole share. This withholding rate could be flat and not connected to your tax code; in that case, the employer will often net out the corrections on a subsequent payroll run. The share prices used are in GBP, from multiplying the USD share price by the prevailing USD/GBP rate on the event date (vesting, sale). Some employers may offer same-day sale, which collapses 2 and 3 into a single event, so in that case usually negligible or zero capital gains (though this feature is perhaps more common with stock options than with RSUs).

sausage_time

My employer does not auto-sell, but then does not deduct tax through payroll until the following month.  That gives enough time to sell some shares (if required) and wire back to UK to offset any tax/NI shortfall.

Also, be aware 3 may result in a loss (If you are unlucky). 

George34

Thanks for your answers.