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Back to basics on RSU

londonwhiskey
Posts: 2 Newbie
in Cutting tax
Hi All,
Appreciate this is a very basic question & most likely answered - but this is the first time I'm dealing with RSUs from an employer & would love a really clear answer.
I work for a US company & have been given a number of restricted stocks (lets say, 1000) - over 4 years. With 25% to vest upon completion of 1 year, which is coming up.
What tax will i pay on this? And will these be held automatically from eTrade, for example? It's a little bit complicated as I have a basic salary which isn't necessarily high, but I am temporarily being given extra each month as a bonus - which will be ending soon. Therefore my fixed basic salary isn't the amount that I am being paid each month and it will drop down.
Therefore, if I sell the 250 shares, am I likely to be taxed 50% of everything?
Like i said - first time dealing with this! Thanks
Appreciate this is a very basic question & most likely answered - but this is the first time I'm dealing with RSUs from an employer & would love a really clear answer.
I work for a US company & have been given a number of restricted stocks (lets say, 1000) - over 4 years. With 25% to vest upon completion of 1 year, which is coming up.
What tax will i pay on this? And will these be held automatically from eTrade, for example? It's a little bit complicated as I have a basic salary which isn't necessarily high, but I am temporarily being given extra each month as a bonus - which will be ending soon. Therefore my fixed basic salary isn't the amount that I am being paid each month and it will drop down.
Therefore, if I sell the 250 shares, am I likely to be taxed 50% of everything?
Like i said - first time dealing with this! Thanks
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Comments
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P.S. I'm also a little confused as I asked a friend and they mentioned tax would be 18%, then started discussing capital gains & saying I get 11k free.0
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As per kidmugsy link in particular post 4.
Depending on the scheme the broker (eTrade) would normally withhold shares to cover the tax element. This is usually a fairly high amount as it covers Tax, NI and Employer NI contributions. In some cases just over 50%.
Of your 250 shares vested in year one you might get 110 into your broker account to sell.
Normally your payroll department would true up the figures to ensure you have paid the right tax amount, which may well mean you get a tax refund that month your shares vest in your regular pay packet. The amount of the 250 shares at the value you received them will be added to your pay and end up as part of your taxable pay for the year.
Sometimes you are able to provide eTrade with funds to pay for the tax so you get all 250 shares allocated. You would need to check with your scheme details. The challenge being if the share price moves a bit and you don't have enough to cover the new amount then they will withhold shares.
Additionally you would be liable for capital gains if you sold your new shares and you made a profit. You would be taxed again on the difference however you have your separate capital gains allowance of £11,300 this tax year which would hopefully mitigate that.0
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