Are you a UK NRI working at companies like Meta, Microsoft, Amazon, Intel, or Google? If you receive Restricted Stock Units (RSUs) as part of your compensation package, managing taxes can feel complicated. RSUs can form a large part of your overall earnings and attract tax obligations in multiple countries. This blog will guide you through how RSUs are taxed for UK NRIs, explain the filing process, highlight common mistakes, and provide strategies to help you save taxes while staying compliant.
RSUs follow a three-stage process that determines your tax liability: grant, vest, and sale.
- Grant: No tax implications when your employer grants the RSUs.
- Vesting: When the RSUs vest (convert to shares), they are treated as employment income and subject to income tax, and if you are UK tax resident at vesting, also to National Insurance contributions.
- Sale: When you sell vested shares, capital gains tax (CGT) may apply on the gain between the vesting value (your cost basis) and the sale price.
Note: Unlike India or the US, the UK does not distinguish short-term and long-term capital gains. All gains are taxed based on your income tax band.
What Are RSUs (Restricted Stock Units)?
Restricted Stock Units (RSUs) represent a promise from your employer to grant you company shares in the future once certain conditions are met. Unlike stock options, employees do not need to buy shares. Vested RSUs are simply delivered when conditions like tenure or performance are satisfied.
RSUs act as a long-term incentive, often vesting over 3 to 4 years. For instance, if you receive 100 RSUs with a four-year vesting schedule, you might receive 25 shares annually. Some companies also impose performance-based “double trigger” provisions such as vesting plus an IPO event.
RSUs do not provide dividends or voting rights until vested, but they retain value, making them a preferred compensation tool over stock options.
Tax Implications When Selling RSU Shares as a UK NRI
Your tax treatment depends heavily on whether you are a UK tax resident or non-resident at the time of vesting and selling RSUs.
1. If You Are a UK Tax Resident at Vesting:
- At Vesting:
- RSUs vesting into shares are treated as employment income.
- Tax is withheld through payroll (PAYE).
- If you are UK resident, both Income Tax and National Insurance Contributions (NICs) will apply.
- At Sale of Shares:
- HMRC looks at the market value on vesting day as your cost basis.
- When you later sell, any increase in value after vesting is taxed as Capital Gains.
- Example:
- RSUs vest at £50/share (100 shares vested → £5,000 taxable income through PAYE).
- Shares sold at £65/share → £6,500 sale value.
- Capital gain = £1,500.
- Annual CGT allowance: £3,000 (2024/25 and 2025/26).
- Rates:
- 10% if you are in the basic rate band.
- 20% if you are in the higher/additional rate band.
2. If You Are a Non-UK Resident at Sale:
- You generally do not pay UK Capital Gains Tax on sales of shares if you are non-resident.
- Exceptions:
- If the company is UK property-rich (over 75 percent of value tied to UK land), gains are still taxable in the UK.
- Temporary non-residence rule: If you leave the UK and then return within 5 tax years, any gains made while abroad may still be taxable.
3. Key Point for NRIs:
Tax liability for RSUs often arises in both your country of work (UK) and your country of residence (for example, India or US). Fortunately, Double Taxation Avoidance Agreements (DTAAs) mean you can claim relief so you do not pay two full taxes on the same RSU income.
Key Documents for RSU Tax Filing:
- P60s/P45s (employment income, PAYE records)
- RSU vesting statements showing cost basis
- Grant letters and agreements
- Sale transaction details
- Foreign tax certificates (if claiming FTC in India or US)
Common Mistakes NRIs Should Avoid in RSU Tax Filing
Handling RSUs across the UK and India or US can be messy. Many NRIs lose money or face HMRC penalties because of these avoidable errors:
- Incorrect Cost Basis Reporting
- Brokerages sometimes report cost basis as zero.
- Always use the actual market value on vesting day as your cost basis.
- Not Filing SA109 (Non-Resident Page)
- Missing SA109 can make HMRC assume you are UK resident and taxable on worldwide income.
- Missing SA109 can make HMRC assume you are UK resident and taxable on worldwide income.
- Overlooking National Insurance Contributions (NICs)
- If RSUs vest while you were linked to UK work, NICs may apply even if you have left the UK.
- If RSUs vest while you were linked to UK work, NICs may apply even if you have left the UK.
- Currency Conversion Errors
- Always convert USD or other currencies into GBP at HMRC exchange rates for vesting and sale.
- Always convert USD or other currencies into GBP at HMRC exchange rates for vesting and sale.
- Poor Record-Keeping
- Keep grant letters, vesting statements, sales records, and tax certificates in one place. Missing records can cause compliance problems.
- Keep grant letters, vesting statements, sales records, and tax certificates in one place. Missing records can cause compliance problems.
- Misunderstanding Double Taxation Rules
- Remember: FTC claims work differently in India and the UK. India requires Form 67, UK does not.
- Remember: FTC claims work differently in India and the UK. India requires Form 67, UK does not.
Conclusion
Restricted Stock Units can be a powerful way to grow wealth, but for UK NRIs, the taxation rules are layered and complex. You face income tax at vesting and possible capital gains at sale, depending on your residency status. Non-residents may be shielded from UK CGT in most cases, but exceptions like the five-year rule or property-linked shares can still bring liabilities. Careful planning, accurate residency declarations through SA109, and proper cost basis reporting are essential to avoid overpayment or HMRC disputes.
The good news is that with the right approach, you do not need to pay tax twice on the same RSU income. DTAAs, Foreign Tax Credit claims, and strategies like selling shares immediately on vesting can make tax filing easier and lighter on your wallet. If your RSU holdings are large, seeking advice from a tax professional who understands both UK and NRI tax systems can protect your wealth while keeping you compliant. By being proactive, maintaining records, and meeting deadlines, you can maximize your RSU benefits without tax-related stress.
Frequently Asked Questions
Q1: How are Restricted Stock Units (RSUs) taxed in the UK for Non-Resident Indians (NRIs)?
RSUs are taxed as employment income at vesting (with Income Tax and possibly NICs). On sale, capital gains tax applies on gains above vesting value if you’re UK tax resident. Non-residents are generally exempt from UK CGT, except under the 5-year rule or for UK-property-linked shares.
Q2: What documentation do UK NRIs need for RSU tax filing?
Grant letters, vesting schedules, sale statements, P60/P45s, RSU valuation statements, and foreign tax certificates if claiming FTC.
Q3: How can NRIs avoid paying tax twice on RSUs?
Leverage DTAAs, claim FTC (Form 67 in India, Self Assessment schedules in the UK). Always verify that cost basis is reported correctly by your broker.
Q4: What are the key deadlines for RSU tax filing in the UK (2025/26)?
- Register for Self Assessment: October 5, 2025.
- Paper returns: October 31, 2025.
- Online returns: January 31, 2026.
- Payment deadline: January 31, 2026.
- Employer share plan returns: July 6, 2025.
Q5: What common mistakes should NRIs avoid when filing taxes for RSUs in the UK?
Failing to file SA109, reporting wrong cost basis, overlooking NICs, ignoring FX effects, and missing records.
