RSUs are simple until the tax bill arrives.

RSUs are sold internally as the simple equity. No strike price, no exercise decision, no cheque to write. The shares just arrive on a schedule, like a slightly glamorous standing order. This is true right up until the first vest lands, at which point the simple equity produces a payslip that looks like it was generated during a power cut, a tax bill priced off a number you never chose, and a small existential question about what all of this is actually for.

The mechanics are not hard. What is hard is that RSUs blur the line between salary and investment so smoothly that most people never notice they have crossed it. This piece is about where the line sits.

The bit that is genuinely simple

A restricted stock unit is a promise: stay employed until a date, and the company hands you a share. A grant of 4,800 units vesting quarterly over four years is really a queue of 16 small deliveries. Until each delivery happens, you own nothing. The grant number in your offer letter is not wealth. It is a forecast of wealth, contingent on you staying, the company existing and, for private companies, some liquidity event eventually turning the shares into money.

That last part matters more than people admit. Plenty of paper fortunes are queues of undelivered RSUs multiplied by the last funding round. A useful private rule: unvested equity is a reason to like your job, not a line in your net worth.

Vest day is a purchase you did not get asked about

On vest day, in most jurisdictions, the market value of the delivered shares is treated as employment income. In the UK that generally means income tax and National Insurance through payroll. In the US it means ordinary income with withholding rules of its own. The percentages differ; the shape is the same everywhere: the taxman treats a vest like a cash bonus that was immediately spent on company stock.

That framing is the single most useful sentence in this piece, so here it is again, slower. A vest is a cash bonus, immediately and automatically spent on your employer's shares. Nobody would blink if you took an actual cash bonus and bought company stock with all of it. They would, reasonably, call it a decision. Holding vested RSUs is exactly that decision, made silently, by default, every vesting quarter.

Holding a vested RSU is buying the stock. The only difference is nobody asked you.

Where the tax bill bites

The classic RSU injury happens in the gap between the vest price and the sale price. Tax is calculated on the value at vest. The share price afterwards is your problem. Consider an illustration with round numbers: shares worth 100,000 vest, roughly 47,000 goes to tax at a high marginal rate, and sell-to-cover leaves you holding around 53,000 of stock. The stock then halves. You now hold roughly 26,500, and the 47,000 tax bill does not shrink in sympathy. People in this position often say they were taxed on money they never had. Technically they had it, for one afternoon, in a brokerage account they had not logged into.

• Withholding is often calculated at flat or default rates that do not match your actual marginal rate, so the payroll deduction can undershoot and leave a second bill at filing time.
• Vesting income can push you across thresholds that quietly remove allowances or benefits, which is how a good equity year produces a confusing tax year.
• Post-vest gains and losses usually move into capital gains territory, a different regime with different rates and its own paperwork.
• Blackout windows can stop you selling at the moment you planned to, so any plan that requires perfect timing is not a plan.

None of this is exotic. Every item on that list is boring, knowable in advance and regularly discovered in arrears. The RSU tax surprise is almost never a surprise about tax law. It is a surprise about calendars.

The operator read

Companies like RSUs because they are sticky, cheap to administer and psychologically brilliant. The queue of future deliveries makes leaving feel expensive, and the automatic arrival of shares makes holding feel like loyalty rather than portfolio construction. That is not a criticism. It is good compensation design. But it means the default path, do nothing and let the shares pile up, was chosen for its retention properties, not for your household balance sheet.

There is also the quieter concentration problem. An employee can be paid in salary, bonus and shares by the same company, while relying on that company for career progression and sometimes a visa. That is a lot of one thing. The useful discipline is deciding, in advance and in writing, what vests are for. Some people sell everything on vest day and treat RSUs as salary, which has the elegant property that the tax was priced off the same number they sold at. Some hold a fixed percentage because they genuinely want the exposure and would buy the stock anyway. Both are defensible. What is not defensible is the most popular strategy in tech: accumulating by inattention, then making one enormous emotional decision during a share price collapse.

The part people will argue about

Selling on vest gets described as leaving money on the table, usually by someone whose company's stock went up. Survivorship does a lot of heavy lifting in equity folklore. For every employee who held through a ten-bagger, there is one who watched a vest halve before the trading window opened, and the second person does not give conference talks. The honest position is that holding concentrated employer stock is a high-variance bet that sometimes pays spectacularly, and a bet is precisely what it is. The paperwork just makes it look like furniture.

RSUs really are the simple equity. The shares arrive, the tax is calculated, the process runs whether you engage with it or not. The only complicated part is the one the scheme documents cannot automate: noticing that every vest day, someone is making an investment decision with your money. It might as well be you.