RSUs - what to do?

moneysaver1978

In 2017, I was awarded RSUs from my US company at a price of $80 (33 shares are granted per year over 4 years) and they are now worth $220.

To date, I haven't done anything with the shares so I am trying to figure out what my next steps are. According to my payslips, I didn't pay any taxes on these shares (yet) although I do receive 1042-S form.

If I was to sell 45 units today, what taxes would I be liable for? I am UK and in 40% tax rate bracket. I saw this thread and a few others in the forum but am none the wiser!

What are the implications of selling them now? Should I wait till next year when all shares are fully granted?

Many thanks in advance!

moneysaver1978

Sorry, a follow up question: Does selling shares fall under the personal tax allowance?

EdSwippet

moneysaver1978 said:

If I was to sell 45 units today, what taxes would I be liable for? I am UK and in 40% tax rate bracket. I saw this thread and a few others in the forum but am none the wiser!

Your cost for these 45 shares should come to 45 x $80 multiplied by the USD/GBP rate in effect at the date you received these shares. Your sale price is whatever you sell these 45 shares for, multiplied by the USD/GBP rate in effect on date of sale.

Your capital gain is the difference between these two. You pay tax on capital gains to the extent that your total gain for the year exceeds £12,300 (2020/21 CGT allowance), at 10% if in basic rate tax, 20% if in higher rate tax.

moneysaver1978 said:

According to my payslips, I didn't pay any taxes on these shares (yet) although I do receive 1042-S form.

This is unusual, and you should check it. My understanding of things is that UK companies are required to treat US RSUs as PAYE salary, so subject to both income tax and NI withholding. Just as if the company paid you the cash instead, then.

moneysaver1978 said:

What are the implications of selling them now? Should I wait till next year when all shares are fully granted?

Implications of selling at any point, either now or later, are as above: potential capital gains tax liability. Selling gradually over several tax years will maximise your use of the capital gains tax allowance, and minimise or ideally eliminate any capital gains tax liability.

Based on the numbers you gave, your capital gain here on sale of 45 shares might be perhaps somewhere on the order of £5k, so likely well within a single year's capital gains tax allowance (assuming no other gains). Your full allocation is 132 shares. At today's prices, selling 132 shares in a single chunk would put you over a single year's capital gains tax allowance. (Of course, the future share price won't be today's price, it'll be either higher or lower.)

moneysaver1978 said:

Does selling shares fall under the personal tax allowance?

No. There's a separate capital gains tax allowance. See above.

moneysaver1978

Thank you, @EdSwippet for your helpful post - this is very much appreciated and consider me educated!

jimmo

Are you sure the shares are yours to sell?

Normally with US employers and RSUs there is a "vesting day" when some or all of the shares become yours. On that day you have to pay Income Tax (and NICs) on the difference between the vesting day market value of the shares and what you paid for them.

If the shares haven't vested yet that would explain why you haven't paid Income Tax yet. Then it becomes more complicated. Take a look at this.

https://forums.moneysavingexpert.com/discussion/comment/77755101#Comment_77755101

moneysaver1978

jimmo said:

Are you sure the shares are yours to sell?

Normally with US employers and RSUs there is a "vesting day" when some or all of the shares become yours. On that day you have to pay Income Tax (and NICs) on the difference between the vesting day market value of the shares and what you paid for them.

If the shares haven't vested yet that would explain why you haven't paid Income Tax yet. Then it becomes more complicated. Take a look at this.

https://forums.moneysavingexpert.com/discussion/comment/77755101#Comment_77755101

I think so, yes:


Although I am not sure why I have $0.00 for vested market value for 99 vested RSUs...
Also looking at the history statements, I see "Tax Withholding" which is paid (around $2) per quarter, is this something that they put aside to go towards paying tax?

EdSwippet

moneysaver1978 said:
Although I am not sure why I have $0.00 for vested market value for 99 vested RSUs...

No idea either. At least, assuming you haven't already sold these shares (or had the broker or company auto-sell them for you somehow -- some companies offer this feature). All I can suggest is to check with your broker.

moneysaver1978 said:
Also looking at the history statements, I see "Tax Withholding" which is paid (around $2) per quarter, is this something that they put aside to go towards paying tax?

This sounds like US dividend tax withholding, which is 15% under the US/UK treaty, assuming you have a W-8BEN on file with the broker. Do these shares pay dividends, to the value of $13/quarter ($52/year) or so to you? A look at your annual 1042-S should confirm this. Box 1 'Income code' contains '06'? That's definitely an indication that the broker thinks you own some shares.

As for UK tax on this ... you would need to declare this $52 or whatever dividend for UK tax, but can claim up 15% of it as a foreign tax credit, limited by your actual UK tax liability on these dividends (which would be £0 if under the annual dividend tax allowance).

moneysaver1978

EdSwippet said:

moneysaver1978 said:
Although I am not sure why I have $0.00 for vested market value for 99 vested RSUs...

No idea either. At least, assuming you haven't already sold these shares (or had the broker or company auto-sell them for you somehow -- some companies offer this feature). All I can suggest is to check with your broker.

moneysaver1978 said:
Also looking at the history statements, I see "Tax Withholding" which is paid (around $2) per quarter, is this something that they put aside to go towards paying tax?

This sounds like US dividend tax withholding, which is 15% under the US/UK treaty, assuming you have a W-8BEN on file with the broker. Do these shares pay dividends, to the value of $13/quarter ($52/year) or so to you? A look at your annual 1042-S should confirm this. Box 1 'Income code' contains '06'? That's definitely an indication that the broker thinks you own some shares.

As for UK tax on this ... you would need to declare this $52 or whatever dividend for UK tax, but can claim up 15% of it as a foreign tax credit, limited by your actual UK tax liability on these dividends (which would be £0 if under the annual dividend tax allowance).

Thank you! I do have W-8BEN and get dividends but it seems the broker's website is down so will have a look again later and confirm.

sausage_time

moneysaver1978 said:

jimmo said:

Are you sure the shares are yours to sell?

Normally with US employers and RSUs there is a "vesting day" when some or all of the shares become yours. On that day you have to pay Income Tax (and NICs) on the difference between the vesting day market value of the shares and what you paid for them.

If the shares haven't vested yet that would explain why you haven't paid Income Tax yet. Then it becomes more complicated. Take a look at this.

https://forums.moneysavingexpert.com/discussion/comment/77755101#Comment_77755101

I think so, yes:


Although I am not sure why I have $0.00 for vested market value for 99 vested RSUs...
Also looking at the history statements, I see "Tax Withholding" which is paid (around $2) per quarter, is this something that they put aside to go towards paying tax?

That looks a lot like Schwab, which is the broker my employer uses.  For what it is worth, my Vested Market Value also shows as $0.  Can you see the 99 vested shares somewhere?  My setup is that there is separate brokerage account that the shares get deposited in when vested.  If I click on Accounts/Summary I can see the Employee Stock account and the Brokerage account - but that may just be the way it was set up for us. 

You should be able to sell the 99 now, and the remaining 34 next year.  As above, unless you have other gains there won't be CGT (gain is usually calculated as selling market prices minus price at vesting, so not the total value).

When you come to transfer, as Schwab to do the conversion to UKP - high street bank generally give a poor rate and sometime charge too. If you sell now, you could hold the cash until the remaining shares vest and so just pay one wire fee.