Tax Guide · 2025 Edition

RSU Tax Calculator 2025: How to Work Out Your Restricted Stock Unit Tax in the UK and US

RSUs — restricted stock units — seem simple on paper: your employer promises you shares, they vest, you own them. But the tax side is rarely that clean. This guide walks you through exactly when you get taxed, how much you owe, and what you can do to keep more of what you earn.

What are RSUs and when does the tax clock start?

A restricted stock unit is a promise from your employer to give you a certain number of company shares at a future date — once you’ve met certain conditions, usually staying employed for a set period. That future date is called the vesting date, and it’s the moment everything changes from a tax perspective.

Before vesting, you own nothing tangible. You can’t sell RSUs, transfer them, or pledge them. They sit on a schedule and you wait. Because of this, HMRC in the UK and the IRS in the US agree on one key thing: the grant date doesn’t matter for tax. You don’t owe anything when your employer first tells you about the RSUs.

The moment shares actually land in your account — that’s when they’re treated as income. Whether you sell immediately or hold for years, the tax on the vesting value is triggered the second those shares become yours.

UK PAYE treatment of RSUs at vesting

If you’re based in the UK, your employer handles RSU tax through the PAYE system — the same way your regular salary is processed. When your shares vest, HMRC views the market value of those shares on that day as employment income. Your employer calculates the tax, deducts it before you see the shares, and reports it to HMRC on your behalf.

The taxes that apply are income tax and National Insurance contributions. Income tax depends on which band your total earnings fall into for that year. NI applies at its own separate rates.

Something many people miss: if your RSU vesting pushes your total income above the £100,000 threshold, your personal allowance starts to taper. For every £2 earned above £100,000, you lose £1 of personal allowance. This creates an effective 60% marginal rate between £100,000 and £125,140 — a nasty trap if a large vesting event lands in the wrong tax year.

Employer NI also applies on top — your company pays 13.8% on the value of your RSUs at vesting. This doesn’t come out of your pocket directly, but it’s worth knowing if you’re ever in a position to negotiate a different arrangement.

US federal and state RSU tax rates

In the United States, RSUs are treated as ordinary income at the federal level, meaning they’re taxed at the same rates as your wages. When your shares vest, your employer typically withholds 22% for federal income tax on supplemental wages — but that flat withholding rate is just a starting point, not your final bill.

If your total income puts you in a higher bracket, you’ll owe more at tax time. If you’re in a lower bracket, you may get some of that withholding back as a refund. Your actual federal rate depends entirely on your total taxable income for the year.

On top of federal tax, FICA applies — Social Security at 6.2% up to the wage base ($176,100 in 2025) and Medicare at 1.45% with an additional 0.9% for earnings above $200,000. State income tax varies widely: California tops out at 13.3%, Texas and Florida charge nothing.

How to work out your RSU cost basis

Cost basis is the number that determines how much capital gains tax you pay when you eventually sell your shares — and getting it wrong is one of the most common RSU mistakes people make.

Your cost basis for RSU shares is the fair market value (FMV) of those shares on the day they vested. This is the same value you already paid income tax on. It’s not zero (even though you didn’t write a cheque to buy the shares), and it’s not the price at grant.

Here’s the logic: because you paid income tax on the vesting value, the government considers that value your “purchase price” for capital gains purposes. When you sell, you’re only taxed again on the gain above that baseline.

One thing to check: some brokers report cost basis incorrectly on tax forms, especially for US-based employees. They may show £0 or the original grant price rather than the vesting FMV. Always cross-reference with your equity award statement before filing.

RSU tax calculator — try it now

RSU vs SIP: which one saves more tax?

If your employer offers a choice between RSUs and a Share Incentive Plan — or you’re trying to decide which to prioritise — tax treatment is probably the single biggest factor to weigh up.

The core difference comes down to when tax hits and how much of it you can avoid. RSUs always trigger income tax at vesting, full stop. SIPs, on the other hand, are specifically designed by the UK government to reward long-term employee ownership with meaningful tax reliefs.

In straightforward terms: if you can commit to holding shares for five years and don’t need the liquidity, a SIP almost always wins on tax. The income tax and NI savings alone at the higher rate can be worth 42% of the value — that’s significant. RSUs make more sense if you want flexibility, or if your employer doesn’t offer a SIP at all.

Calculator walkthrough with a worked example

Let’s put all of this together with a real-world scenario. Meet Sarah — she’s a UK-based software engineer who earns £85,000 a year in salary. Her company granted her 500 RSUs two years ago, and 125 of them are vesting this quarter.

Notice how the employer handles the withholding automatically through PAYE — Sarah doesn’t need to set money aside herself. But she should still reconcile the numbers on her self-assessment return, especially because the RSU income pushes her closer to the £100,000 personal allowance taper threshold.

What if Sarah were based in California?

The maths would look quite different. Federal withholding on the $9,100 equivalent (at a 22% flat rate) would be $2,002. But if Sarah’s total US income puts her in the 32% bracket, she’d actually owe $2,912 federally — with an additional California state tax at around 9.3% adding roughly $846 more. Her effective combined rate could be 41% or higher, very similar to the UK figure but structured differently across multiple taxing authorities.