What are restricted stock units (RSUs) and how do they work in the UK? 2026 guide

Just joined a new company or weighing up job offers? One benefit you might need to know about as a UK employee are Restricted Stock Units (RSUs).

Some companies offer their employees RSUs when they join, or as an annual bonus based on company performance. But what is an RSU exactly and how do they work in the UK?

This guide covers everything you need to know including a straight-to-the-point answer for ‘what is an RSU?’, real-life examples, the pros and cons and some FAQs.

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When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in. Tax treatment depends on your individual circumstances and may be subject to future change. The content of this article is provided for informational purposes only and is not intended to be, nor does it constitute, any form of personal advice.

Investments in a currency other than GBP are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in GBP terms. You could lose money in GBP even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

What is a Restricted Stock Unit (RSU)?

Restricted Stock Units (RSUs) are a form of employee compensation or benefit issued by a company. In short, it’s a company’s promise to give you shares in the future, once certain conditions are met.

They’re commonly used to attract and retain talent. They might be offered when you join the company, awarded annually or given when performance or company milestones are achieved.

The key thing to note is that RSUs don’t have any cash or monetary value at the time they’re granted. After a set period of time known as a ‘vesting period’, the RSU will convert into actual shares which you can then keep or sell.

📚 Read: How Wise can save you fees on your next RSU payout

Examples of RSUs

To give you an idea of how RSUs work, here’s a quick example.

Let’s say you join a technology company and are given 100 RSUs, which have a vesting period of four years. Every year, 25% of the RSUs are vested and turned into stock.

• Year 1: 25 shares vest
• Year 2: 25 shares
• Year 3: 25 shares
• Year 4: final 25 shares

As well as this, you may receive additional RSU grants during your employment, each with its own vesting schedule.

Pros and cons of RSUs

Here’s a quick look at the main advantages and drawbacks of RSUs.

Pros of RSUs:

• They are deemed flexible and low risk as you can sell or hold once shares vest
• There’s potential to negotiate RSU amounts during a job offer
• You own the stock even if you leave the company
• Performance and company growth can increase the value of your shares
• RSUs are generally considered more valuable than other investment options as they grant you shares directly rather than simply giving you the ‘right to buy’.

Cons of RSUs:

• RSUs don’t have any value when you first receive them. They don’t pay dividends and you can’t sell them
• Income tax (and sometimes NI) applies on vesting¹
• Different companies have their own policies and processes in relation to RSUs so you might need to ask some questions and do some research.

How do Restricted Stock Units work in the UK?

RSUs are given to an employee on what is known as a grant date. This may be tied to an event such as joining a company, for each year the employee stays at the company, promotions or performance milestones.

Your employer will give you a vesting or distribution schedule explaining when your RSUs convert into shares.

When this happens, the shares become yours. As an employee, it’s then usually up to you to choose whether you hold or sell your shares, depending on your personal financial goals.

📚 Read: How to sell shares in the UK: step-by-step guide

How to manage your RSUs

To manage your RSUs effectively and get the best from your employee benefits:

• Ask your employer for your full vesting schedule
• Make sure you understand the company’s specific RSU policy
• Seek financial advice regarding tax on RSUs once they vest
• Keep track of upcoming vesting dates so you understand when taxable events occur

How vesting works

Vesting simply means the moment your RSUs turn into an actual stock, and you therefore legally own it. This can happen gradually or all at once.

As mentioned, some companies set specific criteria that link vesting to performance conditions.

Can I sell RSUs immediately after vesting?

Typically, yes. Once your RSU vests and the shares are issued, you can sell them immediately. However, this does also depend on:

• Whether your employer has trading windows
• Whether there are any blackout periods (common in publicly traded companies)
• Whether your shares are subject to automatic ‘sell to cover’ tax withholding

This is why it’s important to check your company’s specific RSU policy before selling.

How are Restricted Stock Units taxed in the UK?

RSUs only create tax liability when they are vested, not when they’re granted.² At this point, they’re taxed in a similar way to your salary.² This means you’ll typically pay:

• Income Tax
• National Insurance (NI)
• Capital Gains Tax (CGT) only if you later sell the shares at a profit above the value

The exact amount of tax you’ll pay on RSUs depends on your circumstances, and how your employer has set up its RSU scheme.

Are RSUs taxed at 40%?

RSUs can be taxed at 40% but only if you fall into the higher-rate income tax band.³ This is because RSU income is added to your regular salary for the tax year. So:

• If the total pushes you into the 40% (or 45%) tax bracket, the vested RSUs will be taxed at that rate
• If you’re in the 20% basic rate, your RSUs vest at 20%

National Insurance (NI) may also apply depending on how your employer handles the shares.

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When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in. Tax treatment depends on your individual circumstances and may be subject to future change. The content of this article is provided for informational purposes only and is not intended to be, nor does it constitute, any form of personal advice.

Investments in a currency other than GBP are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in GBP terms. You could lose money in GBP even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

FAQs on Restricted Stock Units

What is the difference between Restricted Stock Units and Stock Options?

RSUs grant you shares directly and immediately upon the vesting period. Stock options give you the right to buy shares at a future date, usually at a fixed price.

📚 Read: RSUs vs Stock options

Are Restricted Stock Units taxed as income?

Yes. RSUs are taxed as income when they vest under UK law.

Do RSUs count as income for UK mortgages?

Some lenders may consider RSUs as income,⁴ but it’s not common in the UK and varies between lenders.

Do RSUs carry voting rights?

RSUs typically only carry voting rights once they vest and convert into actual shares.⁵

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Sources used:

1. Price Bailey - RSUs and tax
2. Frazer James - RSUs and tax
3. Taxd - RSU tax bands
4. Kite Mortgages - RSU and mortgages
5. Investopedia - RSU and voting rights

Sources last checked on date: 01-Dec-2025