Understand how Restricted Stock Units (RSUs) are taxed at vesting and sale in the UK, including income tax, National Insurance, and strategies to reduce your bill.
This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax rules and thresholds are subject to change. Always consult a qualified adviser for guidance specific to your circumstances.
If you work at a tech company — especially a FAANG or large-cap firm — a significant chunk of your total compensation likely comes in the form of Restricted Stock Units (RSUs). Understanding how they're taxed in the UK is essential when evaluating a job offer or planning your finances.
RSUs are a promise from your employer to give you shares of company stock once certain conditions are met, typically a time-based vesting schedule. Unlike stock options, you don't need to buy anything — the shares are granted to you automatically when they vest.
The catch? HMRC treats each vesting event as employment income, and you'll owe tax on the full market value of the shares at that point.
When your RSUs vest, the market value of the shares on that date is added to your employment income for the tax year. You'll pay:
Your employer handles this through PAYE, so you'll typically see a "sell-to-cover" deduction — shares are automatically sold to pay the tax bill, and the remainder is deposited into your brokerage account.
Say you earn a £90,000 base salary and £50,000 worth of RSUs vest in one tranche:
| Component | Amount |
|---|---|
| Base salary | £90,000 |
| RSU vesting value | £50,000 |
| Total taxable income | £140,000 |
At £140,000 total income, you've crossed the £100,000 threshold where your personal allowance starts tapering. For every £2 earned above £100,000, you lose £1 of your £12,570 allowance — creating an effective 60% marginal tax rate on income between £100,000 and £125,140.
On the £50,000 RSU tranche alone, you could lose over £27,000 to income tax and NI combined. That's a 54%+ effective tax rate on your equity.
This is the single biggest pitfall for UK tech workers with RSUs. If your base salary is anywhere near £100,000, a large vesting event can push you into the personal allowance taper zone, dramatically increasing your overall tax bill.
The key numbers to watch:
| Income Zone | Effective Marginal Rate |
|---|---|
| £12,571 – £50,270 | 28% (20% tax + 8% NI) |
| £50,271 – £100,000 | 42% (40% tax + 2% NI) |
| £100,001 – £125,140 | 62% (60% effective tax + 2% NI) |
| £125,141+ | 47% (45% tax + 2% NI) |
If you keep your shares after vesting and they increase in value, you'll owe Capital Gains Tax (CGT) when you eventually sell:
The base cost for CGT purposes is the market value at the date of vesting — i.e., the amount you've already paid income tax on. You only pay CGT on any additional gains above that.
Most financial advisors recommend selling RSUs immediately upon vesting to avoid concentration risk and additional tax complexity. Holding is essentially a bet that your employer's stock will outperform a diversified portfolio.
Pension contributions are the most powerful tool. Contributing to a pension reduces your adjusted net income, potentially pulling you back below the £100,000 threshold and restoring your personal allowance.
For example, a £20,000 pension contribution when your total income is £120,000 would:
Salary sacrifice arrangements are even more efficient, as they also save National Insurance. Check whether your employer offers this — most large tech companies do.
When comparing two offers — one with a higher base salary and one with significant RSU grants — the tax treatment can make a huge difference to your actual take-home pay.
A £130,000 base salary and a £100,000 base + £40,000/year RSUs may look similar on paper, but the net outcome depends on vesting schedules, tax band interactions, and your personal circumstances.
Use OfferEval's offer comparison tool to model these scenarios side by side. It supports FAANG vesting schedules (Amazon's 5/15/40/40, Google's even split, and more) and shows you the real after-tax picture across a 4-year projection.
Use our free calculator to get an instant net income breakdown for any UK salary — including tax, NI, student loans, and pension.
Try the calculatorWritten by OfferEval Team
Helping professionals understand UK tax and make smarter career decisions.