Restricted Stock Units (RSUs) are a form of employer equity compensation in which your employer promises to deliver ordinary shares to you at a future date, subject to a vesting schedule. In the UK, RSUs are taxed as employment income at the point of vesting - added to your salary that month and run through PAYE at your marginal Income Tax and National Insurance rates. There is no tax at the original grant date, but the income tax bill at vesting is often larger than people expect, particularly for senior employees whose RSU vests push their total income above £100,000 and into the 60% effective marginal tax band.

For senior tech professionals at the large US-listed employers some NOVA clients work for, this guide explains how RSUs work, how they are taxed in the UK, the 60% trap to manage, sell-to-cover, the capital gains position, and the planning mistakes we see most often.

What is a Restricted Stock Unit?

At grant, an RSU is just an unvested promise: you don't own any shares, you can't sell anything, and there is no UK tax to pay. The shares only become yours when they vest, at which point they settle into your brokerage account and the tax falls due (covered below).

RSUs replaced traditional stock options as the dominant form of equity compensation at most large US-listed public companies because they are simpler in two ways. Stock options require you to pay an exercise price to receive shares; RSUs convert to shares automatically. And options can expire worthless if the share price falls below the strike price, whereas an RSU always has value at vesting as long as the share price is above zero.

This article covers the standard public-company RSU. Pre-IPO and private-company RSUs work differently - most notably a second "liquidity event" vesting trigger - and are out of scope here. The detail is set out in HMRC's Employment-Related Securities Manual at ERSM20193.

How RSUs work: grant, vesting, settlement

Three dates matter with an RSU plan:

Grant date. When your employer awards the RSUs. No UK tax. The grant is typically expressed as a number of shares, or as a target dollar/pound value converted to shares at the grant date's share price.

Vesting date. When the RSUs convert to actual shares, and when UK tax becomes due. Most large tech employers vest RSUs on a four-year schedule with quarterly or annual cliffs - for example, 25% on the first anniversary and then the remaining 75% in equal quarterly tranches over the next three years. Some use front-loaded schedules (33% / 33% / 22% / 12%) to retain senior hires.

Settlement date. Usually within a few days of vesting, the net shares (after sell-to-cover, explained below) appear in your brokerage account - most commonly Fidelity, Charles Schwab, E*TRADE, or Computershare for the major tech employers. You now own them outright and can sell, hold, or transfer them.

Most large employers grant additional RSUs annually as refresh awards or performance bonuses, creating overlapping vesting tranches - so a senior employee three or four years into their tenure typically has RSUs vesting every quarter. If you leave before vesting, unvested RSUs are forfeited, a structural retention lever the equity grant is designed around.

How RSUs are taxed in the UK

The full UK tax treatment of an RSU at vesting can run to four separate charges on the same vesting tranche.

Income tax. The market value of the vested shares is added to your employment income for that pay period and taxed at your marginal Income Tax rate - 20%, 40%, or 45%, depending on where the vest pushes your year-to-date earnings. Charged through PAYE.

Employee National Insurance. Charged on the same vested value at 2% (most senior employees are above the upper earnings limit, where the 12% lower band stops applying).

Employer National Insurance - frequently passed through to you. Many UK employers' RSU plans contractually pass the employer NICs liability (15% for 2026/27) onto the employee under ITEPA s.222 / ERSM170750. Where this passthrough applies, the employer NI is deducted from the RSU value before income tax and employee NI are calculated.

Worked example. A higher-rate taxpayer earning £150,000 base salary, with £50,000 of RSUs vesting in a single tranche and employer NI passthrough applying:

• Employer NI on £50,000 deducted first: £7,500 (at 15%)

• Remaining RSU value subject to income tax + employee NI: £42,500

• Income tax at 40% on £42,500: £17,000

• Employee NI at 2%: £850

• Net to employee: £24,650 from a £50,000 gross RSU vest, an effective tax rate of 50.7%

The detail is in HMRC ERSM20193 and ITEPA 2003 s.425. PAYE settles the position at vesting; a Self Assessment reconciliation may apply if your adjusted net income crosses £150,000.

The 60% effective tax trap

For UK taxpayers earning between £100,000 and £125,140, every additional £1 of income attracts a 60% effective marginal tax rate. This is the result of the personal allowance taper: for every £2 of income above £100,000, the £12,570 personal allowance is reduced by £1, until it is fully withdrawn at £125,140. Income in this band attracts 40% income tax plus a further 20% effective rate from the personal allowance withdrawal.

This is the £100k tax trap, and it can be the single most punishing interaction between UK income tax and RSU vests. An RSU tranche that pushes total income from below £100,000 into the £100,000–£125,140 band attracts a 60% effective marginal rate on the portion above £100,000.

Worked example. A higher-rate taxpayer earning £90,000 base salary plus a £25,000 RSU vest in the same tax year:

• Total income £115,000; £15,000 of it sits in the 60% band

• 60% effective tax on £15,000: £9,000 (versus the £6,000 a flat 40% would charge)

• The additional £3,000 is the trap

The pension lever. "Pension contributions may affect adjusted net income and associated tax thresholds, depending on individual circumstances. A £15,000 gross pension contribution in the example above pulls adjusted net income to £100,000, eliminates the £3,000 trap charge, and earns 40% tax relief on the contribution itself. This is a planning move we often see in RSU conversations.

Sell-to-cover and what really lands in your account

The default at most large tech employers is sell-to-cover: at vesting, your brokerage automatically sells a portion of the vested shares to pay the PAYE tax bill on your behalf, and the remaining net shares settle into your account.

The proportion sold varies with your marginal tax position:

Marginal tax position	Approximate proportion of the gross vest withheld
45% additional-rate, with employer NI passthrough	~60–62%
40% higher-rate, with employer NI passthrough	~55–57%
20% basic-rate	~35–40%

The practical consequence: a £100,000 vest for a 45% taxpayer typically lands as roughly £38,000–£40,000 of deliverable shares in your brokerage account, with the remainder sold automatically to settle tax. What lands is real shares, not cash - you still need to decide whether to hold them or sell to diversify.

Two alternatives some employers offer: net settlement issues fewer shares rather than selling on-market (functionally identical for the employee), and some plans let you pay the tax from your own cash savings, retaining all the vested shares. The latter may be considered by some individuals, although it increases exposure to a single company and carries additional investment risk.

Capital gains tax when you sell vested RSUs

Once vested and settled, the shares are yours, held at the vesting-day market value as your CGT cost base. From that point, any movement in the share price creates a potential capital gains tax position when you sell.

Sell immediately at vesting. This is one approach that some individuals consider. Whether it is appropriate will depend on individual circumstances, objectives and attitude to investment risk.

Hold and sell later. CGT applies to the gain - the difference between the sale price and the vesting-day market value. For 2026/27, CGT on shares is 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. The annual CGT allowance is £3,000, a meaningful constraint if you have multi-year accumulated RSU positions.

The concentration risk. Holding vested RSUs in your employer's stock long-term doubles your exposure to that company, your salary depends on it, and now so does a growing portion of your investments. We see this most often with employees three to five years into their tenure who have never sold a vesting tranche, and the position has compounded into a substantial slice of net worth concentrated on a single ticker.

The spousal transfer angle. In some circumstances, individuals may consider transferring shares between spouses - which are CGT-free under the inter-spousal exemption -, subject to obtaining appropriate tax and financial advice.

Common RSU planning mistakes

We see five recurring mistakes in RSU planning:

• Holding all vested RSUs in employer stock long-term. Concentration risk doubles the dependency. Clients often arrive with several years of accumulated vests they never sold; the planning conversation is usually about putting structure around future vests, not unpicking past holdings.

• Not factoring employer NI passthrough into cash-flow planning. Clients can underestimate the effective tax bite on their next vest by 5–8% because they forget the passthrough.

• Missing the pension lever to manage the 60% band. Failing to consider the impact of pension contributions on adjusted net income where relevant.

• Not tracking the GBP value of US-listed shares for FX reporting. The GBP value at vesting day is the CGT cost base, so FX moves between vesting and sale create paper gains or losses for CGT purposes even if the USD price is unchanged.

• Assuming PAYE has fully settled the tax position. Once adjusted net income crosses £150,000, Self Assessment applies. PAYE withholding at the vesting tranche may be approximately right, but the year-end reconciliation can produce additional charges.

For the broader decisions after a large RSU vest, see our companion piece on eight essential questions to ask after a large share payout.

How NOVA can help

A major RSU vest shouldn't be viewed as an isolated event. When framed correctly, it has the potential to become a powerful driver of your long-term financial plans.

We work with professionals to bring joined-up thinking to these moments. By running financial models that encompass your full financial picture, we align tax-efficient savings strategies with structured risk management to give you the clarity to make confident, data-backed decisions about what your RSUs can actually enable.

If you'd like to have a conversation about RSUs with a NOVA adviser, we offer a free 20-minute introductory call. There's no obligation and no charge.

How this article was prepared

This article was written by Tom Derbyshire, Partner & Financial Adviser at NOVA Wealth. Figures reflect the 2026/27 UK tax year.

Capital at risk. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change. We do not provide tax advice. This article does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact a financial adviser. All figures quoted are for illustration purposes only. Past performance is not a guide to future performance. If you are unsure of your options you should seek professional financial advice or visit Pensionwise.gov.uk.

Issued on behalf of Nova. Nova is a trading name of Nova Wealth Ltd, which is authorised and regulated by the Financial Conduct Authority (FRN: 778951) and is a limited company registered in England & Wales (10739796).

Sources used:

• HMRC Employment-Related Securities Manual ERSM20193 - RSUs

• HMRC Employment-Related Securities Manual ERSM170750 - Employer NI passthrough

• HMRC Capital Gains Manual CG56350 - Employment-related securities CGT

• GOV.UK - Personal Allowance taper

• GOV.UK - Capital Gains Tax rates 2026/27

• Income Tax (Earnings and Pensions) Act 2003, s.425

About the author

Tom Derbyshire, Financial Adviser. Tom is a Partner at NOVA Wealth, based in London. He works primarily with senior professionals in corporate roles on equity compensation, pension and retirement planning, investment strategy, and personal tax planning - helping clients turn a complicated pay package into a plan they can actually act on. Connect with Tom on LinkedIn.