If your employer pays you in shares as well as salary, this episode is for you.
Simon and Laura tackle one of the most consistently misunderstood areas of UK tax: employment related equity. Whether you have RSUs, share options, or some other form of equity award, the UK tax treatment is not always obvious, and the consequences of getting it wrong can be significant.
They start with the basics: what RSUs are, why HMRC treats them as employment income rather than capital gains at the point of vesting, and what your base cost looks like once you have received the shares. From there they move on to share options, explaining why the tax point works differently, you are taxed when you exercise, not when the options vest, and what that means in practice for people sitting on unvested or unexercised awards.
The episode then gets into the area where LSR do a substantial amount of client work: what happens to your equity awards when you move countries during the vesting period. If you are relocating to the UK with existing RSU grants, or leaving the UK with unvested shares, time apportionment is the key concept. HMRC will look across the entire vesting period and tax the UK-resident portion accordingly. The problem, as Simon and Laura explain, is that company payrolls frequently get this wrong, sometimes in your favour, sometimes not.
There is also a memorable story about a former Lehman Brothers employee who never sold a share, kept his entire retirement fund in company stock, and was completely wiped out in 2008. Not financial advice, but a useful reminder about concentration risk.
Topics covered in this episode:
- How RSUs are taxed as employment income in the UK and what that means for your payslip
- The difference between RSUs and share options, and why the tax point is different for each
- What your base cost is once shares vest and how capital gains tax applies when you sell
- Time apportionment: how HMRC calculates the UK-taxable portion of awards that span periods of residence and non-residence
- Why company payroll often apportions incorrectly and how to spot if you are overpaying or underpaying
- Concentration risk and why diversifying equity awards is worth thinking about
If you have questions about your equity awards and how they interact with your UK tax position, book a call with us.
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