Do You Pay Capital Gains Tax When You Sell RSU Shares?

Your cost is the value at vesting

An RSU (restricted stock unit) is a promise from your employer to give you shares later. Nothing is yours until the units vest, meaning the conditions are met, usually a period of time still employed. On each vesting date you receive the shares.

That's when income tax applies. The amount taxed is the market value of the shares on the day you get them, less anything you paid for them, which for RSUs is usually nothing. If your employer's shares are listed on an exchange such as the London Stock Exchange or NASDAQ, your employer must take the tax through PAYE, like tax on salary. National Insurance is usually due as well. ERSM20192 covers how RSUs are taxed, and EIM11901 covers PAYE.

For Capital Gains Tax, the amount taxed as income becomes your cost. Since 6 April 2016, RSUs have been taxed under the rules for share options. Its helpsheet HS287 says the cost of shares from an option is what you paid plus the amount charged to income tax. This stops the same value being taxed twice, once as pay and again as a gain.

So Capital Gains Tax only applies to any rise in the share price after vesting. A broker or plan statement that shows a cost of zero, or a cost in dollars, isn't the figure HMRC uses. The cost is the value in pounds that was taxed as income.

Selling on the vesting day

Some plans sell part of the shares on the vesting day to pay the income tax. This is called sell-to-cover. All the shares are yours, and a broker sells enough of them to cover the tax. That's a sale by you, so it counts for Capital Gains Tax.

HMRC's matching rules decide which shares a sale is set against. Shares you acquire on the same day as a sale come first, so a sale on the vesting day is matched with that day's vest. The cost and the sale price are almost the same, so the gain is tiny.

Say 100 shares vest at £50 each, and 47 of them are sold the same day at £50.20.

If you sell all the shares on the vesting day, the same applies to every one of them. The sale price is rarely exactly the vesting value, so expect a small gain or loss rather than nothing.

Some plans use net settlement instead. Your employer keeps back enough shares to pay the tax and gives you the rest, so there's no sale by you on the vesting day. Your plan statement or plan administrator can tell you which your plan uses.

Holding the shares after vesting

Shares you keep join a single holding for that company, called a section 104 pool. Every vest adds its shares and its vesting value, and the cost of any shares you sell is the average cost per share. Shares in the same company that you bought yourself go into the same pool. The section 104 guide explains the pool step by step.

Say you have RSUs that vest every three months, and you keep three vests of 60 shares each. Then you sell all 180 shares in May 2026 at £70 each, and nothing vests in the 30 days after.

The first £3,000* of your gains in the tax year is tax-free under the annual exempt amount. If this is your only gain and you're a higher rate taxpayer, the other £1,500 is taxed at 24%*, which is £360. A basic rate taxpayer pays 18%* on gains that fit in the part of the basic rate band their income hasn't used, and vested RSUs count as income. They pay 24%* on the rest. The guide to how Capital Gains Tax works covers the rates and allowance.

* Correct at the time of writing. Rates and allowances can change, so check HMRC's current Capital Gains Tax rates and tax-free allowance on GOV.UK.

The next vest and the 30-day rule

This is the rule that catches RSU holders out. After the same-day rule, a sale is matched with shares of the same company you acquire in the 30 days after it. Only then does it use your pool. The rule in section 106A applies to shares you acquire, not only shares you buy, so a vest counts. HMRC doesn't mind that you didn't choose the date.

If your RSUs vest monthly or quarterly, a sale can easily land within 30 days before a vest. That sale is then matched with the new vest first, at the new vest's value, and only the rest is matched with your pool.

Say your pool holds 200 shares with a cost of £8,000, an average of £40. The price has fallen, and you sell 100 shares at £30 each, expecting a loss of £1,000. Two weeks later, 50 shares vest at £31.

The other £450 of loss isn't gone. Your pool keeps its average cost of £40 rather than taking in the new shares at £31. So a later sale from the pool shows a smaller gain or a bigger loss. That £450 only shows up when you sell shares from the pool, which may be in a later tax year. The same matching works the other way when the price is rising: the new vest's higher value is set against the sale, which reduces the gain on it. The 30-day rule guide explains the rule in full.

If the share price falls after vesting

The income tax was charged on the value at vesting, and a later fall doesn't change it. Instead, a fall gives you a capital loss. Say 100 shares vested at £50, so £5,000 was taxed as income, and you sold them later for £3,500. That's a loss of £1,500.

A capital loss reduces your gains, not your income, so it can't bring back any of the income tax. It's set against any other gains in the same tax year, and anything left can be carried forward. You have 4 years from the end of the tax year you sold in to claim it. The guide to capital losses on shares explains how.

Shares listed in the US

If your employer's shares are listed in the US, the share price is in dollars. Your cost is still the value in pounds that was taxed through payroll. Your sale proceeds are converted into pounds at the exchange rate on the day you sell, as HMRC's manual CG78310 says. HMRC doesn't name a source for the rate, but expects a reasonable method used consistently.

Say 100 shares vested at $100 each when the rate was $1.25 to £1, so £8,000 was taxed as income. You sell them at $120 when the rate is $1.40 to £1.

The guide to US shares and the exchange rate has more on how the rate moves a gain.

Reporting the sale

Capital Gains Tax isn't taken through payroll, even though the income tax on vesting was. You pay it if your total gains for the tax year are above the £3,000* allowance. If you already fill in a Self Assessment return, you report it there. Otherwise you can report it through HMRC's real-time Capital Gains Tax service by 31 December after the tax year ends.

* Correct at the time of writing. Rates and allowances can change, so check HMRC's current Capital Gains Tax rates and tax-free allowance on GOV.UK.

If you're registered for Self Assessment, you must also report your gains if you sold more than £50,000 of assets in the tax year. That applies even if your gains are under the allowance. Sell-to-cover sales count towards that total, because they're sales by you. With several vests a year, they can add up to £50,000 even when every sale shows a gain of a few pounds. GOV.UK sets out both tests, and the SA108 guide shows which boxes to fill in.

When to get professional help

If you moved to or from the UK while your RSUs were vesting, residence rules affect how they're taxed, and that needs an adviser. So do shares in a company that isn't listed, where your employer may not operate PAYE. Large gains, or RSUs from several employers with incomplete records, are also worth taking to a tax adviser.