Share schemes across two countries: RSUs, options and the vesting trap

Figures relate to tax year 2025 (US) · 2025-26 (UK)

Employee share schemes reward you for work done over years. Tax systems, though, want an answer on one day. That mismatch is the whole problem for anyone who moved between America and Britain while a grant was still vesting.

Both countries tax the same award, and both use their own timing. So a single vesting event can create a UK charge and a US charge on overlapping slices of value. This guide covers how each system works, how the slices are split, and how credits stop you paying twice.

Key takeaways

• Restricted stock units are taxed as employment income when they vest, in both countries.
• Britain apportions the gain by where you worked during the vesting period.
• America taxes its citizens on the whole amount, wherever the work happened.
• UK-approved plans such as EMI and SAYE carry no American recognition at all.
• Selling the shares later creates a separate capital gain, measured from the vesting value.

What counts as a share scheme?

Share schemes are arrangements that pay you in employer equity rather than cash. The common forms are restricted stock units, share options, and purchase plans that let you buy at a discount. Each has its own timing rules, and those rules drive the tax.

The moment that matters differs by type. Units are taxed when they vest. Options are usually taxed when you exercise them.

Purchase plans bite when you buy. Get the moment right and the rest of the calculation follows.

How does each country tax an RSU?

Both countries treat the vesting value from share schemes as employment income, taxed at ordinary rates. Britain collects through payroll, often selling shares to cover the bill. America taxes the same value on your return, with any withholding credited against it.

According to GOV.UK guidance on employee share schemes (opens in a new tab), the treatment depends on whether the plan is tax-advantaged. Most awards from American employers are not. So they fall into the ordinary income rules on both sides.

Which country taxes which slice?

Britain apportions the award. It looks at the whole vesting period and asks where you actually worked during it. Work two of four vesting years here, and roughly half the gain is British. America does not apportion for its own citizens, so the full amount stays taxable there.

That asymmetry is why credits matter so much here. The overlapping slice gets taxed twice on paper. Then the foreign tax credit removes the duplication, provided the timing lines up between the two tax years.

Equity is earned over years and taxed in an afternoon. The calendar around that afternoon decides who gets paid.

Why do UK-approved share schemes cause trouble?

Because America does not recognise them. An EMI option or a SAYE plan carries genuine British tax advantages, and those advantages simply do not travel. The IRS sees an ordinary option instead, then taxes it under its own rules from the start.

So an American in Britain can hold an award that looks tax-free at home and fully taxable abroad. In our practice we see this most often with SAYE plans. A modest saving scheme quietly produces an American bill nobody budgeted for.

What happens when you move mid-vest?

The apportionment gets interesting. Britain measures your workdays across the vesting period, so a move splits the grant between countries. America keeps taxing citizens on everything, and taxes non-citizens only on the American slice of the work.

Timing the move around a vesting date can therefore change the bill materially. Our guide to moving back to the US covers that planning. The same logic runs in reverse for people arriving in Britain.

How do you handle equity across both systems?

Work from the grant paperwork rather than the payslip. Payroll shows what was withheld, not what each country is owed. Then run the sequence below for every award, ideally as it vests rather than a year later:

1. Collect the grant date, the vesting schedule and the vesting date for each tranche.
2. Record where you worked during each vesting period, counted in workdays.
3. Take the share price on the vesting date, and convert it at that day's rate.
4. Apportion the value for the British calculation, using the workday split.
5. Report the full amount on the American return if you are a citizen.
6. Claim foreign tax credits for the overlapping slice, matching the tax years.
7. Keep the vesting value as your cost base for the eventual sale.

What about selling the shares afterwards?

That is a separate event with separate rules. Your cost base is the value taxed at vesting, so only growth after that point becomes a capital gain. Both countries measure that gain, and both give credit for the other where it applies.

Per the IRS guidance on stock options (opens in a new tab), the treatment turns on the type of award and when you dispose of the shares. Currency movement adds a further wrinkle. The American gain is measured in dollars throughout, so the rate moves the answer.

Do employee share schemes affect your reporting too?

They can, once the shares land in an account. Income comes first, and the reporting duty follows separately as the balance grows. Many people handle the income correctly for years, then discover the disclosure side much later.

So treat them as two questions with two answers. Ask what each country taxes at vesting. Then ask, once a year, whether the resulting holdings have crossed any reporting threshold. The second question rarely answers itself.

A worked example

Take an illustrative example. An American joins a London office in 2023 with a four-year grant worth $80,000. She works two years here, then two more in New York. A tranche vests in 2025 while she is still in Britain.

Britain taxes the portion earned by her UK workdays, through payroll. America taxes the whole tranche, because she is a citizen. Her foreign tax credit then covers the American charge on the British slice. Tax remains due only on the American portion.

National Insurance and payroll taxes

Equity is employment income, so social charges follow it. Britain applies National Insurance to most awards from unapproved plans. America applies its own payroll taxes to the same value for people inside its system.

The totalization agreement decides which country collects. Only one should, and the certificate is what proves it. The IRS guidance on totalization agreements (opens in a new tab) sets out how that works. Equity awards follow the same rule as salary.

The mistakes and penalties that follow equity awards

Share schemes go wrong expensively, because the amounts are large and the paperwork arrives late. These are the ones we untangle most often. Every one is avoidable with notes taken at vesting:

• Assuming payroll withholding settled everything, when it rarely covers both countries.
• Missing the apportionment entirely, and paying British tax on American workdays.
• Treating an EMI or SAYE plan as tax-free on the American return.
• Using the sale price as the cost base, which double counts the vesting income.
• Forgetting the shares themselves are a reportable foreign asset once held abroad.
• Letting the two tax years drift, so the credit lands in the wrong period.

That reporting point matters as balances grow. Shares held through a foreign broker can push you over the asset thresholds. Our guide to the international forms you may owe explains which apply, and the award creates income first and a reporting duty second.

What records should you keep?

More than your employer keeps for you. Payroll systems track withholding, not cross-border apportionment. Share plan portals rarely survive a job change either. So build your own file as you go, and keep it somewhere permanent.

• The grant agreement and the full vesting schedule for every award
• The share price and exchange rate on each vesting date
• A workday record showing where you were during each vesting period
• Payslips showing what each country actually withheld
• Sale confirmations, with dates and proceeds in both currencies

Do options work differently from units?

Yes, and the difference is timing. Units vest on a date you cannot control, so the tax point is fixed for you. Options give you a choice, because the charge usually lands when you exercise rather than when they vest.

That choice is genuine planning space. Exercising in a low-income year, or before a move, can change which country taxes the gain and at what rate. So options deserve a conversation before you click, not after.

What if your employer gets it wrong?

It happens often, and it is not really their fault. Payroll teams administer one country's rules, and cross-border apportionment sits outside what most systems can compute. So the payslip reflects a policy rather than your actual position.

The fix is not an argument with payroll. Instead you reconcile at the return, claiming credits for what each country over-collected. Keep the payslips, because they evidence the withholding you are crediting.

Where withholding was too low, the balance falls due with the return. Where it was too high, the refund comes back through the same route. Either way, the return settles it rather than the employer.

How US UK Tax Accountants helps

We rebuild share schemes award by award, so the apportionment and the credits both rest on real workday records. Our double tax treaty relief service covers the credit positions. We prepare both returns, so the same numbers appear on each.

One senior specialist owns the file, on a fixed fee agreed in writing before any work begins. Where a vesting date is coming and a move is planned, we say what the timing is worth while you can still act on it.

Get your equity taxed once

If your share schemes have only ever been handled by one country's payroll, the other side is probably unresolved. Tell us which share schemes you hold and when they vest. We will model both positions and quote a fixed fee in writing. Book a consultation and hear back within one working day.

Last reviewed 9 September 2026 by the US UK Tax Accountants Tax Team. This article is general information, not personal tax advice — speak to a qualified US/UK tax adviser about your own position.