Restricted Stock Units / Section 431
Discussion
Hi all,
Is anyone familiar with Section 431 and it's impact on RSU's?
I've just been granted a significant (to me!) amount of equity which vests over 5 years. Also been notified of Section 431 and I'm not sure if I should be opting into this.
In my understanding this means I pay income tax on the full grant now, with then only capital gains tax to be paid in the future (difference in value between vesting and sale) - is that correct?
Is the income tax that is potentially due now paid via cash/PAYE or can it be covered by sale of shares? I have a reasonable bonus coming as well that would cover the income tax liability but had other plans for this..
I am seeking out qualified advice but any help would be appreciated, thank you!
Is anyone familiar with Section 431 and it's impact on RSU's?
I've just been granted a significant (to me!) amount of equity which vests over 5 years. Also been notified of Section 431 and I'm not sure if I should be opting into this.
In my understanding this means I pay income tax on the full grant now, with then only capital gains tax to be paid in the future (difference in value between vesting and sale) - is that correct?
Is the income tax that is potentially due now paid via cash/PAYE or can it be covered by sale of shares? I have a reasonable bonus coming as well that would cover the income tax liability but had other plans for this..
I am seeking out qualified advice but any help would be appreciated, thank you!
I would check with your company, they usually have a tax guide for such schemes.
I've been getting paid in RSU bonus for over 20 years by US tech companies, the way it worked for our scheme the shares were treated as PAYE income for tax purposes.
When you vest the shares you could select to pay the tax or sell shares to cover. Basically they retain 45% of the value for tax assuming that you are a 45% tax payer (if you are not in 45% tax band the tax would sort itself out following month through PAYE)
So every 3 months when the shares vested, if say 1000 shares vested, 650 would be available for you to sell. 450 sold to cover the tax liability. You could then leave them in the investment account (CGT may become payable on future gains) or sell shares from US account and repurchase same shares in a UK ISA (a good tax efficient option if you wish to continue to invest) or just take the cash as your quarterly bonus.
The following month the gross amount of shares sold showed up on your PAYE payslip, along with tax retained, no further action required on your part.
I've been getting paid in RSU bonus for over 20 years by US tech companies, the way it worked for our scheme the shares were treated as PAYE income for tax purposes.
When you vest the shares you could select to pay the tax or sell shares to cover. Basically they retain 45% of the value for tax assuming that you are a 45% tax payer (if you are not in 45% tax band the tax would sort itself out following month through PAYE)
So every 3 months when the shares vested, if say 1000 shares vested, 650 would be available for you to sell. 450 sold to cover the tax liability. You could then leave them in the investment account (CGT may become payable on future gains) or sell shares from US account and repurchase same shares in a UK ISA (a good tax efficient option if you wish to continue to invest) or just take the cash as your quarterly bonus.
The following month the gross amount of shares sold showed up on your PAYE payslip, along with tax retained, no further action required on your part.
Our company didn’t offer any tax advice and refused to do so.
But it worked in exactly the same way, although you had no choice in how the tax was collected, when they vested every three months they automatically with held the highest possible tax amount, 56%. Covers 45% tax plus NIC and employers NIC. Although I think some of the employers NIC was reclaimable and that was factored in.
It was then correctly adjusted either through normal PAYE or self assessment time depending on where you were.
Appeared as income on your payslip.
CGT only came in if you held the stock and sold later.
If you kept any stock, then you had take account of Section 104, i.e. maintain and track of average cost pounds. Any CGT liability is calculated against the average cost.
But it worked in exactly the same way, although you had no choice in how the tax was collected, when they vested every three months they automatically with held the highest possible tax amount, 56%. Covers 45% tax plus NIC and employers NIC. Although I think some of the employers NIC was reclaimable and that was factored in.
It was then correctly adjusted either through normal PAYE or self assessment time depending on where you were.
Appeared as income on your payslip.
CGT only came in if you held the stock and sold later.
If you kept any stock, then you had take account of Section 104, i.e. maintain and track of average cost pounds. Any CGT liability is calculated against the average cost.
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