Selling vested RSUs is the moment people forget about. The income tax was handled at vest, often through sell-to-cover, so the rest feels like clean profit. It is not. The growth between the vest-date value and the sale price is a capital gain.
When does CGT actually apply to RSUs?
Only when you sell, gift, or otherwise dispose of the shares, and only on the gain above your cost base. If you sell immediately at vest there is little or no gain, so there is little or no CGT. The longer you hold a rising share, the larger the eventual gain.
What is my cost base?
It is the market value of the shares on the day they vested, the same figure that was taxed as income. You are not taxed twice on that value. CGT applies only to the increase after vest.
How does HMRC decide which shares I sold?
If you vested in several tranches at different prices, HMRC does not let you pick. It matches a sale to acquisitions in a fixed order: shares bought the same day, then shares bought in the next 30 days (the bed-and-breakfast rule), then the Section 104 pool, which is the average cost of everything else.
Several approaches are commonly used to manage Capital Gains Tax on shares. Which (if any) fits depends on your circumstances:
- Spreading disposals across tax years may allow more of the £3,000 annual exempt amount to be used.
- Transferring shares to a spouse or civil partner before a sale can allow their allowance and rate bands to be used -- subject to their circumstances.
- Shares moved into an ISA or pension may shelter future growth from CGT, within relevant limits.
- Keeping records of every vest date and value ensures the cost base is accurate and defensible.