Restricted stock units are taxed as employment income when they vest, by both the United States and the United Kingdom. If you worked in both countries between grant and vest, each country taxes the part earned by workdays there. The US also taxes its citizens and green card holders on the whole amount, with a credit for UK tax on the UK-source part.
This article is for employees and executives who hold unvested RSUs and have moved, or are about to move, between the two countries. It expands the RSU section of our guide to US-UK tax for founders, fund managers and executives, and covers sourcing, the UK and US treatment after a move, withholding, the later sale of the shares and the records that support both returns.
When are RSUs taxed in the US and the UK
Neither country taxes the grant of an RSU. Both tax the market value of the shares as employment income when the units vest and the shares are delivered. Any rise or fall in value after that date is a capital gain or loss, computed separately in each country.
In the UK an RSU is not a tax-advantaged plan. It falls within the general rules for employee share schemes (opens the official GOV.UK page in a new tab), and where the shares can readily be sold the employer accounts for income tax and National Insurance through PAYE (opens the official GOV.UK page in a new tab). In the US the value is wages. A US employer reports it on Form W-2 and withholds federal tax, and state tax where a state has a claim.
Private company awards often carry a second condition, so that nothing vests until a sale or listing. The income then arises on that later date, and the period over which it was earned can run back many years. An employee who has changed country in that time needs a record of the whole period.
How is RSU income split between the two countries
Both countries treat an RSU as pay for the period from grant to vest. Where the holder worked in both countries during that period, the income is divided by the workdays spent in each. The fraction is worked out separately for each vesting tranche, not once for the whole award.
US rules source pay earned over more than one year on a time basis, which for an RSU generally means days worked in the US over total days worked between grant and vest. HMRC applies a similar approach to share awards held by internationally mobile employees, apportioning the income over the period in which it was earned and allowing a different basis where the plain result would not be just and reasonable.
An award granted in one year and vesting in instalments over four has four different periods, so the same move produces four different fractions. Business trips count as well. A week of meetings in New York by a London employee adds US workdays, and a calendar kept at the time is far more reliable than one rebuilt from flight records years later.
How does the UK tax RSUs if you arrive or leave part-way through vesting
The UK generally taxes the part of the award that relates to the time the holder was UK resident or performing duties in the UK, whichever side of the move the vesting date falls. Arriving before a vest does not usually bring the whole award into UK tax, and leaving before a vest does not take the UK part out.
For someone arriving, the slice earned while non-resident and working abroad is generally outside the UK charge. The employer should operate PAYE on the UK part, although in practice payrolls sometimes withhold on everything or on nothing, and the difference is settled through UK Self Assessment. National Insurance follows its own rules, based on the periods in which the employee was within UK social security, so its split can differ from the income tax split.
A new resident who qualifies can claim the foreign income and gains regime (opens the official GOV.UK page in a new tab) for the first four tax years of residence. HMRC's guidance says foreign employment income is not covered by that claim, though a separate relief for duties performed overseas may be available in the same years. A claim may cover a foreign gain on a later sale of the shares. For a US citizen the regime removes UK tax only, so the US tax is then paid in full.
How does the US tax RSUs after a move
A US citizen or green card holder is taxed on the whole value at vest, wherever they live and wherever the work was done. A non-citizen who has left the US and is no longer resident there is taxed only on the part earned by US workdays.
For a citizen, UK tax on the UK-workday part is claimed as a credit on Form 1116 against US tax on that same foreign-source income. The US-workday part is US-source, so UK credits cannot reduce the tax on it. Where the UK also taxes that part, because the holder was UK resident throughout, the treaty sets the order in which each country gives relief, and our cross-border treaty relief service prepares the computation for both returns.
A non-citizen who has left reports the US part on Form 1040-NR. A green card holder remains a US person until the status is formally ended, not when the flight leaves. Some states also tax former residents on equity income by reference to days worked in the state between grant and vest. A state gives no credit for UK tax and is not bound by the federal treaty, as our page on US state tax returns explains.
What happens when two payrolls withhold on the same vest
Withholding is an estimate collected at vest, not the final tax. A mobile employee can find that the UK payroll and the US payroll each withhold on all or part of the same shares. The excess is recovered through the returns, which can take many months.
Most plans fund the withholding by sell-to-cover, selling enough of the vesting shares to meet the tax and delivering the remainder. If both payrolls withhold in full, more shares are sold than the final liabilities require, and the employee holds fewer shares than expected. US rules can relieve an employer of federal withholding on a US citizen working abroad where foreign tax must be withheld on the same pay, so it is worth raising the workday split with both payrolls before the vesting date.
Timing adds to the problem. The US tax year is the calendar year and the UK tax year runs from 6 April to 5 April, so a vest in February belongs to one US year and to a UK year whose return is not due until 31 January of the following year. Claiming the foreign tax credit (opens the official IRS page in a new tab) on an accrual basis usually keeps the UK tax in the same US year as the income.
How are the shares taxed when you sell them
The value taxed as income at vest becomes the cost of the shares. Only the movement after vest is a capital gain or loss. Each country computes it in its own currency under its own matching rules, so the two figures are rarely the same.
In the US the basis of each share is its dollar value at vest, and each sale is reported on Form 8949 (opens the official IRS page in a new tab). Brokers sometimes report a basis of zero, which taxes the vesting income a second time unless it is corrected. In the UK the gain is charged to Capital Gains Tax (opens the official GOV.UK page in a new tab) at 18% and 24% for 2025/26, after an annual exempt amount of £3,000, with the sterling value at vest generally forming the base cost.
- Shares sold on the vesting day to cover tax usually show little or no gain in either country.
- The UK matches sales with same-day purchases, then purchases in the next thirty days, then a pooled average cost. The US identifies specific lots.
- The US long-term rate needs a holding period of more than a year, counted from vest.
- Sterling and dollar values move apart, so one sale can be a gain in one country and a loss in the other.
- After a move, the country you have left may no longer tax the gain, subject to its rules for citizens and for temporary non-residents.
What records should you keep for cross-border RSUs
Keep the grant and vesting documents, a calendar of working days by country from each grant date, the payslips and broker statements for every vest, and the exchange rates used. With those, both returns can be prepared from the same facts, and a payroll error can be shown and corrected.
Consider a US citizen employed by a US technology company who moves from Seattle to London halfway through a four-year vesting schedule. On each later vest the UK taxes the London workday fraction through PAYE and National Insurance. The US taxes the full value, allows a credit for UK tax on the London fraction and collects its own tax on the Seattle fraction. A tranche that vests soon after the move is mostly US-source, and the last tranche is mostly UK-source.
If her employer withholds US tax on every vest as though she had never left, she is over-withheld and recovers the difference on her Form 1040. Our individual tax returns service prepares that return alongside the UK one, and the guide for founders, fund managers and executives covers options, share purchase plans and elections that follow different rules.
- Grant agreement, plan rules and the vesting schedule for every award
- A workday calendar by country, including business trips and holidays
- Payslips, Form W-2 and P60 showing what each payroll taxed and withheld
- Broker confirmations for each vest and sale, with share price and exchange rate
- Dates of arrival and departure, and any residence or treaty claims made
General information, not advice. The right answer depends on your circumstances and the tax year concerned.
