Restricted Stock Units
Discussion
I work for an American company who issued me with some RSUs 12 months ago, divesting over 3 years. Thing is, no one really explained how they work and can't get a straight answer from anyone!
First lot have divested this month and in my payslip I see a line in the 'Earnings' section for 'RSU Income'. I then see a deduction amounting to 57% of the 'Earnings' labelled 'RSU Proceed's.
Confused as to what's happened here, can anyone shed any light? I've not instructed the provider (Fidelity NetBenefits, if that makes any difference) to sell anything and they seem to be marked as 'Distributed'.
How does this all work? Can I assume that I've now paid tax on the divested shares and - when I choose to sell - I get the total value shown in the provider portal?
First lot have divested this month and in my payslip I see a line in the 'Earnings' section for 'RSU Income'. I then see a deduction amounting to 57% of the 'Earnings' labelled 'RSU Proceed's.
Confused as to what's happened here, can anyone shed any light? I've not instructed the provider (Fidelity NetBenefits, if that makes any difference) to sell anything and they seem to be marked as 'Distributed'.
How does this all work? Can I assume that I've now paid tax on the divested shares and - when I choose to sell - I get the total value shown in the provider portal?
I'll give you my rough basic interpretation after I went through the same confusion as you.
You get 90 stock at year zero which vest over 3 years. At this point they are essentially worthless to you as you can't sell but equally don't pay any tax on them.
In year 1, 30 stock will vest. At this point, assuming you are a taxpayer, you become liable for tax owed on your 'benefit'. Essentially, they will use some of your vested stock to cover your tax (say 10 for example). The other 20 stock will be yours to sell if you want and the other 60 remain un-vested until year 2 and 3.
ETA: read vested as distributed
You get 90 stock at year zero which vest over 3 years. At this point they are essentially worthless to you as you can't sell but equally don't pay any tax on them.
In year 1, 30 stock will vest. At this point, assuming you are a taxpayer, you become liable for tax owed on your 'benefit'. Essentially, they will use some of your vested stock to cover your tax (say 10 for example). The other 20 stock will be yours to sell if you want and the other 60 remain un-vested until year 2 and 3.
ETA: read vested as distributed
Mr Scruff said:
Thanks - I still don't understand why I'm seeing income from them in my payslip though.
Tried asking by boss yesterday and he had no idea!
It would appear that your RSU's are automatically vested after a set period, and the value of them, after deduction of income tax etc, is then paid into your account.Tried asking by boss yesterday and he had no idea!
I have the same in my company.
When you say you see an income is it balanced out? i.e did you see £x of income then an equivalent deduction of £x or very close to x? In the case of my business the month after they vest they show up on my payslip.
We(UK) have a reciprocal tax agreement with the US but the details are vague so despite me not being a 50% tax payer i get taxed in the US by losing half my RSUs(shares). In the example quoted by the poster above of 30RSUs a year i lose 15 straight away. The way i understand it is that HMRC appreciate you arent a 50% tax payer so pay your back the equivalent of the 3 shares in my case to bring me back to being a 40% tax payer. In the case of younger staff in my place who are likely only 20% tax payers they get more back again.
As an aside your US employer sounds as clued in on UK tax rules as mine that they havent bothered their @rse to give some sort of HR position for your office to understand this.
Depending on the stock performance of your company it can further benefit you to pay the tax you owe to the US Governement in cash if you have it spare and keep your full RSU entitlement. I've done this a few times, my companies shares continue to rise and hence when i do sell I am better off.
When you say you see an income is it balanced out? i.e did you see £x of income then an equivalent deduction of £x or very close to x? In the case of my business the month after they vest they show up on my payslip.
We(UK) have a reciprocal tax agreement with the US but the details are vague so despite me not being a 50% tax payer i get taxed in the US by losing half my RSUs(shares). In the example quoted by the poster above of 30RSUs a year i lose 15 straight away. The way i understand it is that HMRC appreciate you arent a 50% tax payer so pay your back the equivalent of the 3 shares in my case to bring me back to being a 40% tax payer. In the case of younger staff in my place who are likely only 20% tax payers they get more back again.
As an aside your US employer sounds as clued in on UK tax rules as mine that they havent bothered their @rse to give some sort of HR position for your office to understand this.
Depending on the stock performance of your company it can further benefit you to pay the tax you owe to the US Governement in cash if you have it spare and keep your full RSU entitlement. I've done this a few times, my companies shares continue to rise and hence when i do sell I am better off.
Bear in mind that there is a reciprocal tax agreement between the USA and UK. So, if as is likely you have paid withholding tax in the USA on the proceeds of the RSUs,you can offset that tax against your UK tax liability on the RSU proceeds. If you have paid withholding tax you should get a statement provided by the organisation that administers the RSUs showing the full details. You can only offset the USA tax paid via SA to HMRC in the UK.
R.
R.
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