How are RSUs taxed in the UK?

Income Tax + NI at vesting at marginal rate. The vesting market value is added to your gross salary that tax year - taxed via PAYE. Employer often does "sell-to-cover" - sells some vested shares to pay the tax automatically. Subsequent gains/losses on the retained shares fall under CGT (with base cost = vesting price).

What's the Section 222 ITEPA 2003 timing trap?

If your employer is foreign + can't withhold UK tax on RSUs at vest, you must pay HMRC the tax due within 90 days of the END OF THE TAX YEAR (not 90 days of vest). Missing this deadline triggers Income Tax becoming "earnings on employment" via Section 222 - shares treated as employment income at later inflated price + double-taxation risk. Critical for US-employed UK workers.

How do EMI options differ from RSUs?

EMI (Enterprise Management Incentive) gives CGT treatment instead of Income Tax on share gains. Eligibility: company under £30m gross assets, under 250 full-time employees (rising to £120m + 500 FTE from April 2026), trading company. £250,000 limit per individual, £3m company total. Tax at exercise: usually nothing if exercise price = market value at grant. Sale: 14% (2025/26) → 18% (2026/27) BADR rate.

What is CSOP and how does it work?

Company Share Option Plan - tax-advantaged options for non-EMI companies. £60,000 per individual grant cap (raised from £30,000 in April 2023). No company size restriction. Tax at exercise: nothing if held 3+ years and exercise price = market value at grant. Sale: CGT at 18%/24%. Used by FTSE 250 + AIM companies offering employee options.

What is SIP (Share Incentive Plan)?

Best UK employee share scheme on a per-share basis. Annual limits: £3,600 free shares + £1,800 partnership shares (you buy) + matching shares (employer matches your partnership purchase). Hold 5 years: no Income Tax or CGT on disposal. Hold 3 years: partial relief. Used by Tesco, BAE Systems, BP, Sainsbury's + many FTSE 100.

What is SAYE (Save As You Earn)?

3 or 5 year savings contract attached to an option to buy company shares at 20% discount to market price at start. Save £5-£500/month. At maturity, choose: exercise option + buy shares (no Income Tax on the discount), or take cash + bonus + interest. Risk-free upside - if share price falls, take cash. CGT applies only on subsequent sale gains.

How does sell-to-cover work?

At vest, broker sells enough shares to cover Income Tax + NI on the FULL vesting amount. Remaining shares deposited in your brokerage account. The tax withheld is paid directly to HMRC via your employer's PAYE. The vesting reported on your payslip for tax purposes. CGT base cost on retained shares = vesting price.

When do I pay CGT on my RSU/option shares?

Only when you SELL. At vest you pay Income Tax + NI on the vesting value. From vest, the shares are your asset with base cost = vesting price. When you later sell, CGT applies on any gain from vesting price to sale price. 18% basic-rate band, 24% higher-rate, £3,000 AEA per year.

How are foreign-employer (e.g. Google/Meta) RSUs taxed in UK?

Same Income Tax + NI rules apply if you are UK tax resident at vest. Foreign employer's payroll may not withhold UK tax - you must report via Self Assessment + pay within 90 days of TAX YEAR END (Section 222 trap). Most UK-employee FAANG arrangements use shadow payroll or RTI processing to withhold correctly. Check your payslip - if no PAYE deducted on vest, save the tax yourself.

Can I transfer RSUs to my spouse to use both AEAs?

Once vested + in your name: yes, no-gain-no-loss transfer to spouse. Spouse can then sell using their own AEA. Pre-vest: RSUs are typically non-transferable (subject to your employment contract + scheme rules). Best practice: receive shares yourself, then transfer to spouse before sale if both AEAs are useful.

Practical guide

UK Stock Options + RSU Tax Complete Guide 2026/27

Complete UK tax guide for stock options, RSUs and employee share schemes - PAYE at vest mechanics, Section 222 timing trap, EMI vs CSOP vs SAYE vs SIP comparison, sell-to-cover, CGT on disposal.

RSU taxation in the UK

RSUs (Restricted Stock Units) are taxed as ordinary employment income at the moment of vesting:

Vesting market value × number of shares = taxable income
Added to your gross salary for that tax year
Taxed at your marginal Income Tax rate via PAYE
Employee NI (8%/2%) applies up to + above UEL
Employer NI (15%) also applies - some employers pass-through to employee

Common practice: "sell-to-cover" automatically sells enough vested shares to pay the tax due, with remaining shares deposited in employee\'s brokerage.

The Section 222 ITEPA 2003 trap (foreign-employer RSUs)

If your employer is foreign (e.g. US-headquartered) and can\'t withhold UK PAYE at vest:

You must pay HMRC the Income Tax + NI due
Deadline: 90 days from the END of the tax year vesting occurred (NOT 90 days from vest)
Missing this deadline triggers Section 222: shares treated as employment income at LATER (often inflated) price + risk of double-taxation
Critical for FAANG-equivalent UK employees on Google, Meta, Amazon, Stripe vests

Most large foreign employers use UK shadow payroll or RTI processing to handle correctly. Always check payslip after vesting event - if no PAYE shown, save the tax + report via Self Assessment.

UK employee share schemes compared

Scheme	Best for	Tax treatment	Annual limit
SIP	Established employers	No IT/NI/CGT if held 5 years	£3,600 free + £1,800 partnership
SAYE	Established employers	20% discount tax-free, CGT only on sale gains	£500/month max
EMI	Startup + scale-up	CGT at 18% (BADR from April 2026)	£250,000 grant value
CSOP	Mid-cap PLC	CGT (no IT) if exercised 3+ years after grant	£60,000 grant value
RSU (unapproved)	Tech / FAANG	Full IT + NI at vest	No limit
Unapproved options	Default	Full IT + NI at exercise	No limit

RSU worked example: £150k UK salary + £100k vesting

Component	Amount
Base salary	£150,000
RSU vesting market value	£100,000
Total taxable income	£250,000
Income Tax (40%/45% bands + PA tapered)	~£94,500
NI on RSU (2% above UEL)	£2,000
Sell-to-cover (typical 45% of vest)	£45,000 of shares sold
Net RSU retained	~£55,000 of shares

CGT on RSU/option shares after vesting

Once vested, RSUs become your shares with base cost = vesting price. When you sell:

Gain = Sale proceeds - Base cost (vesting price) - transaction fees
2026/27 CGT: 18% basic-rate band, 24% higher-rate
£3,000 AEA per year
30-day rule applies if you repurchase same security within 30 days

Common RSU/option mistakes

Selling shares year-end at large gain in single tax year - bunches CGT instead of spreading across years with both AEAs
Not transferring shares to spouse before sale - loses double-AEA opportunity
Section 222 missed deadline - 90 days from tax year end, not from vest
Confusing exercise vs vesting - options exercised + held still have CGT but no IT (if approved scheme)
Selling all RSUs immediately - misses CGT-efficient timing across multiple tax years

Frequently asked questions

How are RSUs taxed in the UK?
Income Tax + NI at vesting at marginal rate. The vesting market value is added to your gross salary that tax year - taxed via PAYE. Employer often does "sell-to-cover" - sells some vested shares to pay the tax automatically. Subsequent gains/losses on the retained shares fall under CGT (with base cost = vesting price).
What's the Section 222 ITEPA 2003 timing trap?
If your employer is foreign + can't withhold UK tax on RSUs at vest, you must pay HMRC the tax due within 90 days of the END OF THE TAX YEAR (not 90 days of vest). Missing this deadline triggers Income Tax becoming "earnings on employment" via Section 222 - shares treated as employment income at later inflated price + double-taxation risk. Critical for US-employed UK workers.
How do EMI options differ from RSUs?
EMI (Enterprise Management Incentive) gives CGT treatment instead of Income Tax on share gains. Eligibility: company under £30m gross assets, under 250 full-time employees (rising to £120m + 500 FTE from April 2026), trading company. £250,000 limit per individual, £3m company total. Tax at exercise: usually nothing if exercise price = market value at grant. Sale: 14% (2025/26) → 18% (2026/27) BADR rate.
What is CSOP and how does it work?
Company Share Option Plan - tax-advantaged options for non-EMI companies. £60,000 per individual grant cap (raised from £30,000 in April 2023). No company size restriction. Tax at exercise: nothing if held 3+ years and exercise price = market value at grant. Sale: CGT at 18%/24%. Used by FTSE 250 + AIM companies offering employee options.
What is SIP (Share Incentive Plan)?
Best UK employee share scheme on a per-share basis. Annual limits: £3,600 free shares + £1,800 partnership shares (you buy) + matching shares (employer matches your partnership purchase). Hold 5 years: no Income Tax or CGT on disposal. Hold 3 years: partial relief. Used by Tesco, BAE Systems, BP, Sainsbury's + many FTSE 100.
What is SAYE (Save As You Earn)?
3 or 5 year savings contract attached to an option to buy company shares at 20% discount to market price at start. Save £5-£500/month. At maturity, choose: exercise option + buy shares (no Income Tax on the discount), or take cash + bonus + interest. Risk-free upside - if share price falls, take cash. CGT applies only on subsequent sale gains.
How does sell-to-cover work?
At vest, broker sells enough shares to cover Income Tax + NI on the FULL vesting amount. Remaining shares deposited in your brokerage account. The tax withheld is paid directly to HMRC via your employer's PAYE. The vesting reported on your payslip for tax purposes. CGT base cost on retained shares = vesting price.
When do I pay CGT on my RSU/option shares?
Only when you SELL. At vest you pay Income Tax + NI on the vesting value. From vest, the shares are your asset with base cost = vesting price. When you later sell, CGT applies on any gain from vesting price to sale price. 18% basic-rate band, 24% higher-rate, £3,000 AEA per year.
How are foreign-employer (e.g. Google/Meta) RSUs taxed in UK?
Same Income Tax + NI rules apply if you are UK tax resident at vest. Foreign employer's payroll may not withhold UK tax - you must report via Self Assessment + pay within 90 days of TAX YEAR END (Section 222 trap). Most UK-employee FAANG arrangements use shadow payroll or RTI processing to withhold correctly. Check your payslip - if no PAYE deducted on vest, save the tax yourself.
Can I transfer RSUs to my spouse to use both AEAs?
Once vested + in your name: yes, no-gain-no-loss transfer to spouse. Spouse can then sell using their own AEA. Pre-vest: RSUs are typically non-transferable (subject to your employment contract + scheme rules). Best practice: receive shares yourself, then transfer to spouse before sale if both AEAs are useful.