The RSU Tax Timeline

A restricted stock unit is a promise to hand you a share once you have stayed long enough to earn it. Until that moment, called vesting, you own nothing you can sell, tax or spend. The number in your offer letter is a forecast, not a balance.

That distinction is the whole guide. Grant creates the promise. Vesting turns the promise into taxable pay. Selling turns the shares into money and starts a second, separate tax story. Lose track of which stage you are in and you will either overpay attention to a paper number or underpay a very real bill.

1. Grant

   The award begins and the vesting schedule starts. Usually nothing to pay, because you cannot yet touch anything.

2. Vest

   Units become real shares. In most places this is the income tax event, valued at that day's price.

3. Sale

   You dispose of the shares. Any move in price since vesting is a capital gain or a capital loss.

4. Tax year boundary

   Each 6 April in the UK resets allowances and can push a vest and a later sale into different years.

Two of these four moments are tax events. The other two just decide which tax year the events land in. Most RSU pain is a timing problem wearing a tax costume.

At grant you receive paperwork and a schedule. In most cases there is nothing to pay yet, because unvested units have no value you can access. The job at this stage is quiet and important: get the documents, understand the schedule, and resist counting the forecast as wealth.

Vesting is where RSUs stop being simple. In the UK, the market value of the shares delivered at vesting is generally treated as employment income, so income tax and National Insurance are usually collected through payroll on that value. The price on the day sets the bill. What the price does afterwards is a different story with a different tax.

Because most people cannot write a cheque for the tax on a stack of shares, employers usually cover it by selling or withholding some of the newly vested shares. Sell-to-cover, net settlement and a cash top-up are the common versions. The mechanics vary. The outcome rhymes: the number of shares you keep is smaller than the number that vested, and the value you were taxed on is the gross figure, not the net one.

Once shares have vested and been taxed as income, they become ordinary shares you happen to own. Their value on the vesting day becomes your acquisition cost. From that point, any gain or loss when you eventually sell sits under Capital Gains Tax, a wholly separate regime with its own allowance, rates and paperwork.

This is why holding after vesting is a real investment decision, not a continuation of your salary. You have already paid income tax to acquire the shares at that price. Keeping them is choosing to run a concentrated position, and the tax on any further gain is worked out only when you sell.

Rates and allowances are date-sensitive and were checked against official UK material in July 2026. Other countries tax vesting and sale on entirely different lines, so any cross-border fact changes the answer.

Being taxed on shares does not mean you can sell them whenever you like. Listed companies run dealing codes, and employees who might hold inside information sit inside closed periods and blackout windows when trading is restricted or needs pre-clearance. Vesting into a closed window is common, and it catches people who assumed tax and access arrive together.

Almost every RSU surprise is a date that someone did not have in front of them. Put the following on one page and most of the drama disappears.