UK Company Shares Vesting and Income Tax 2026/27: RSUs and EMI

How Share Vesting Creates an Income Tax Charge

When your employer grants you shares or share options, the tax treatment depends entirely on the type of scheme and the moment at which value passes to you. The key event for most employees receiving Restricted Stock Units (RSUs) is the vest date -- the day on which the shares become unconditionally yours.

On that date, the full market value of the shares is treated as employment income under the Income Tax (Earnings and Pensions) Act 2003. Your employer must report this through Real Time Information (RTI) payroll and operate PAYE. You will also pay employee National Insurance contributions (NICs): 8% on the amount falling within GBP 12,570 to GBP 50,270, and 2% on any amount above GBP 50,270.

For 2026/27 the income tax rates are:

• 20% basic rate on income from GBP 12,571 to GBP 50,270
• 40% higher rate on income from GBP 50,271 to GBP 125,140
• 45% additional rate on income above GBP 125,140

If a large vest pushes your total remuneration above GBP 100,000 you enter the personal allowance taper zone. For every GBP 2 of income above GBP 100,000, you lose GBP 1 of your GBP 12,570 personal allowance, creating an effective marginal rate of 60% on income between GBP 100,001 and GBP 125,140. This is one of the most painful tax traps for UK technology and finance employees who receive annual RSU vests. Use the CalcHub Take-Home Pay Calculator to model the impact of a large vest on your net position.

RSUs: How Your Employer Reports and Withholds Tax

Most large UK employers and UK subsidiaries of US-listed companies grant RSUs on a quarterly or annual vest schedule. When shares vest, the common practice is to withhold a portion of the vesting shares (the sell-to-cover method) to fund the PAYE and NIC liabilities.

For example, if 1,000 shares vest and each is worth GBP 20, the employment income recognised is GBP 20,000. At a 40% income tax rate and 2% employee NIC rate, the total deduction is GBP 8,400. Your employer sells approximately 420 shares to cover this, leaving you with 580 shares. These 580 shares have a CGT base cost of GBP 11,600 (580 x GBP 20).

You should receive a P60 (and potentially a P11D or payslip note) reflecting the vest income. If your employer does not operate PAYE on vest -- for example because you received shares from a non-UK parent company -- you are personally responsible for declaring the income through Self Assessment and paying the tax by 31 January following the tax year.

EMI Options: The Premium UK Tax-Advantaged Scheme

Enterprise Management Incentive (EMI) schemes are the most tax-efficient share option arrangement available to qualifying UK smaller companies (gross assets under GBP 30 million, fewer than 250 employees). HMRC must approve the option grant.

The critical tax advantage is that, provided the option was granted at or above the Actual Market Value (AMV) agreed with HMRC at the time of grant, there is no income tax or NIC charge at the point of exercise. The gain that would otherwise be treated as employment income is instead treated as a capital gain when you sell.

If the option was granted below AMV -- for example because the company negotiated a discount -- the discount element (the difference between the option price and AMV at grant) is treated as employment income at exercise.

On a later share sale, the CGT base cost is the exercise price paid (plus any income tax amount charged at exercise). The gain above that base cost is subject to CGT. Business Asset Disposal Relief (BADR) may reduce the CGT rate to 18% from April 2025, provided:

• You have held the options or shares for at least two years since grant
• The company remains a qualifying trading company
• You are an officer or employee

BADR applies at 18% in 2026/27 (changed from the previous 10% rate). The lifetime limit for BADR remains GBP 1 million of qualifying gains.

HMRC-Approved Plans: SAYE, SIP and CSOP

Three further HMRC-approved schemes offer specific reliefs worth knowing.

Save As You Earn (SAYE): You save a fixed monthly amount (GBP 10 to GBP 500) over a 3-year or 5-year contract. At the end you can buy shares at a discount of up to 20% on the grant-date price. No income tax or NIC arises on the discount or any growth in share price between grant and exercise. CGT only applies on later sale above the AEA.

Share Incentive Plan (SIP): Employers can give up to GBP 3,600 of free shares per year and match partnership shares you buy (up to GBP 1,800 per year). Shares held in the SIP plan for five years come out entirely free of income tax and NIC. CGT is based on market value when shares leave the plan.

Company Share Option Plan (CSOP): From April 2023 the limit doubled to GBP 60,000 of options per employee. No income tax on exercise if the option price was at least the market value at grant and options are held for at least three years. CGT applies on later sale.

All three schemes must be offered on similar terms to all qualifying employees (no cherry-picking for directors only) and are subject to individual scheme rules.

CGT on Share Sales After Vesting

Once income tax has been paid on vest (or on exercise of an unapproved option), your CGT base cost is the market value at that point. Further growth in share price is subject to CGT when you sell.

Key 2026/27 CGT figures:

• Annual Exempt Amount (AEA): GBP 3,000 per individual
• Basic-rate taxpayer (income plus gain stays within GBP 50,270): 18%
• Higher or additional rate taxpayer: 24%
• BADR qualifying gains: 18%

Spouses and civil partners each have their own AEA and basic-rate band. Transferring shares between spouses on a no-gain/no-loss basis before sale can double the annual exemption to GBP 6,000 and potentially shift gains to the lower-rate taxpayer.

Losses from other share disposals can be set against gains. Losses must first offset gains of the same year; unused losses carry forward indefinitely.

If you hold shares in multiple lots (for example quarterly RSU vests), HMRC's share identification rules -- the Section 104 pool -- average the base cost across all shares of the same class. This simplifies record-keeping but means you cannot cherry-pick which shares you sell to optimise CGT.

Reporting Share Income and Gains

Employment income from RSU vests should appear on your P60 if your employer operated PAYE. Check it carefully -- errors are common with internationally granted awards.

If you need to file Self Assessment (for example because you have gains above the AEA, or because your employer did not withhold tax), the deadlines are:

• 5 October: register for Self Assessment if new to it
• 31 January: file online return and pay tax due
• 31 July: pay second payment on account

HMRC has detailed guidance in its Employment Related Securities (ERS) pages. Employers must submit an annual ERS return by 6 July after the tax year.

Use the CalcHub Capital Gains Tax Calculator to estimate your CGT bill on share sales, and the CalcHub Income Tax Calculator to see how a vesting event interacts with your salary and other income.

Planning Considerations for 2026/27

If you have flexibility over your vest schedule, timing large vests carefully can reduce the tax cost significantly. Vesting in a year where your other income is lower -- for example a year of unpaid parental leave -- could keep you in the basic-rate band.

Consider contributing extra pension contributions to bring your adjusted net income below GBP 100,000 and recover your personal allowance. Each GBP 1 of pension contribution effectively saves GBP 0.60 in tax for those caught in the taper zone.

If you are leaving an employer, check whether unvested options lapse or whether there is a "good leaver" provision. EMI options must generally be exercised within 90 days of leaving qualifying employment to retain EMI tax benefits.

Always take advice from a qualified tax professional before exercising options or selling significant share holdings -- particularly if the amounts could push you into a higher tax band or trigger the personal allowance taper.