Do I pay tax twice on a UK RSU vest as a US citizen?

Not if the return is prepared correctly. The UK charges income tax and National Insurance at vest through PAYE, and the United States charges ordinary income under section 83 on the same value. The US then allows a foreign tax credit on Form 1116 for the UK tax on the foreign source portion. Genuine double taxation is rare. Unclaimed relief, caused by wrong sourcing or wrong year, is common.

Can I make a section 83(b) election on an RSU?

No. Section 83 applies to property transferred for services, and a restricted stock unit is a contractual promise to deliver shares rather than a present transfer of shares. The early inclusion election attaches to genuine restricted stock, not to a bare RSU. Founders holding actual restricted shares, or UK restricted securities, should look at the US election and the separate UK section 431 ITEPA 2003 election, which we cover in their own right.

What happens if I do not reimburse my employer for the PAYE on my vest?

HMRC requires the employee to make good to the employer any PAYE the employer could not deduct from cash pay, within 90 days of the end of the tax year in which the chargeable event occurred. Miss that and a charge arises under section 222 ITEPA 2003, and HMRC's guidance is explicit that the charge remains even if you pay the employer later. Founders on low cash salaries hit this most often.

Which US tax year does the UK tax on my vest belong to?

Under the cash method the credit follows the date the UK tax was paid. PAYE deducted at the vest usually falls in the same US calendar year as the income. Any Self Assessment balancing payment for the UK year to 5 April is due the following 31 January, which is a later US year. Unused credits carry back one year and forward ten, so the carryback is often the repair.

Does issuing RSUs in my own UK company affect my Form 5471?

Yes. Form 5471 category tests turn on ownership percentages. Control means more than 50 per cent of vote or value, a US shareholder holds 10 per cent or more, and a controlled foreign corporation is one where US shareholders hold more than 50 per cent. Vesting and exercises change those percentages, so an equity event can move you between categories or create CFC status. The penalty for missing the form starts at $10,000.

Do I have to report my UK share plan account on an FBAR?

If the shares are held through a non-US broker or plan administrator, that is a foreign financial account and it counts toward the $10,000 aggregate FBAR threshold, filed through FinCEN's BSA E-Filing System. Shares held directly on your UK company's register are not an account, so no FBAR arises on them, but they are still specified foreign financial assets reportable on Form 8938 once your thresholds are met.

US Tax on UK RSUs and Options for US Founders

US tax UK RSU stock options questions almost always come down to a single structural fact: the United States taxes a US citizen founder on the whole award under section 83 of the Internal Revenue Code, on its own timetable, while the United Kingdom taxes the same award as employment income and collects it through PAYE on a different timetable. Neither system waits for the other. The tax is rarely genuinely doubled, but the relief is routinely unclaimed, because the credit for the UK tax has to be proved on a US return that measures the same event in a different currency, in a different tax year, and sometimes against a different amount of income.

This is written for the US citizen who founded or helps run a UK company, not for the general expatriate employee. The founder case is harder for three reasons. The founder is usually both the recipient of the award and the person who signs the company return that reports it. The founder is often the majority shareholder, so the same company that issues the RSUs is a controlled foreign corporation on the founder's own Form 5471. And the founder's income is usually well into the UK additional rate, so the arithmetic of the foreign tax credit is unforgiving. In the returns we prepare, the vest year is the year that goes wrong, and it usually goes wrong quietly.

US tax UK RSU stock options: the two rulebooks that run at once

A restricted stock unit is a contractual promise by a company to deliver shares once stated conditions are met. HMRC describes an RSU award in its Employment Related Securities Manual as normally an agreement to issue stock or shares at the time the award vests, with vesting occurring when every condition, whether service based or performance based, has been satisfied. The manual is published at https://www.gov.uk/hmrc-internal-manuals/employment-related-securities/ersm20193 and confirms that RSU amounts are generally taxed as earnings in the year they are received, unless the entitlement amounts to a right to acquire securities, in which case from 6 April 2016 the charge arises under Chapter 5 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003.

The United States reaches the same economic event through section 83. IRS Publication 525, at https://www.irs.gov/publications/p525, states that restricted property transferred for services is generally included in income when it becomes substantially vested, and that a substantial risk of forfeiture exists where the rights to the property are conditioned on the future performance of substantial services or on a condition related to the purpose of the transfer. Once the forfeiture condition falls away, the fair market value of the shares is ordinary compensation income.

So both systems tax the same value at broadly the same moment. What differs is everything around it: which year that moment falls into, who collects the money, what currency the number is measured in, and which parts of the award each country claims as its own.

When is a UK RSU actually taxable for US purposes?

For US purposes the taxable moment is the point at which the shares are no longer subject to a substantial risk of forfeiture and the founder holds them, or has an unconditional right to them. For a plain time-vesting RSU that is the vest date. Where the plan documents separate vesting from delivery, and the shares are settled later, the analysis becomes a deferral question rather than a vesting question, and the drafting of the plan governs. That is the single most common place where a UK plan written for UK employees produces an unexpected US answer for the founder who happens to be a US citizen.

Section 83 applies to property transferred in connection with the performance of services. An RSU standing alone is a promise, not a present transfer of shares, which is why the early inclusion election that attaches to genuine restricted stock does not attach to a bare RSU. That election, and its UK counterpart under section 431 ITEPA 2003, is a subject in its own right and we treat it separately. For share options the position in Publication 525 is different again. A nonstatutory option with a readily determinable fair market value at grant is included in income at grant. An option without one, which describes almost every private UK company option, produces no income at grant and is taxed on exercise or transfer, measured by the spread between what was paid and what the shares were worth.

RSU granted: no US income, no UK income, but a reportable event may already exist for HMRC scheme registration purposes.
RSU vested and settled: US ordinary compensation income under section 83, and UK employment income collected through PAYE.
Unapproved option granted: normally no charge in either country where there is no readily determinable value at grant.
Unapproved option exercised: US income on the spread, UK charge on the chargeable event under the securities option rules.
Shares sold afterwards: capital gain or loss in both systems, measured from the value already taxed as compensation.

How the UK taxes and collects on the same vest

The UK charge on a non-tax-advantaged award is income tax and National Insurance on the market value of the shares at the chargeable moment, less anything the founder paid for them. GOV.UK sets out the four tax-advantaged plans, being Share Incentive Plans, Save As You Earn, Company Share Option Plans and Enterprise Management Incentives, at https://www.gov.uk/tax-employee-share-schemes, and is explicit that other arrangements do not carry the same advantages. A founder's RSU plan and a founder's unapproved option are in that second group. We cover EMI, SAYE and SIP separately, because the qualifying conditions are a different discipline entirely.

Collection is where UK practice diverges sharply from US practice. HMRC's guidance at https://www.gov.uk/hmrc-internal-manuals/employment-related-securities/ersm170050 requires the employer to operate PAYE on its best estimate of the chargeable amount where the securities are readily convertible assets, and notes that National Insurance is also likely to be due. For the tax year 6 April 2026 to 5 April 2027, GOV.UK publishes the employer secondary Class 1 rate at 15 per cent, and the category A employee rates at 0 per cent, 8 per cent and 2 per cent across the three earnings bands, at https://www.gov.uk/national-insurance-rates-letters. Income tax rates and thresholds for the same year, including the 45 per cent additional rate above £125,140 and the withdrawal of the Personal Allowance at £1 for every £2 of adjusted net income above £100,000, are at https://www.gov.uk/income-tax-rates.

There is then a trap that catches founders more often than employees, because founders frequently take no cash salary large enough to absorb the deduction. Where the employer cannot deduct the full PAYE from cash pay, the employee must make good the shortfall to the employer within 90 days of the end of the tax year in which the chargeable event occurred. HMRC's guidance at https://www.gov.uk/hmrc-internal-manuals/employment-related-securities/ersm170400 states that failing to do so triggers a charge under section 222 ITEPA 2003, and that the charge remains even if the money is paid after the 90 days have run. A February vest with no cash salary behind it is the classic fact pattern.

Unapproved options: what the UK charge actually measures

A UK unapproved share option is close in economics to a US nonstatutory option, but the mechanics are codified differently. The chargeable events are listed at section 477(3) ITEPA 2003, and the taxable amount is computed under section 478 as AG minus DA. HMRC's worked treatment at https://www.gov.uk/hmrc-internal-manuals/employment-related-securities/ersm110510 explains that AG is the market value of the securities acquired less the consideration given for them, and DA covers the consideration given for the grant of the option itself together with incidental costs such as stamp duty and broker fees. In HMRC's own example, an option over 1,000 shares acquired for £1, exercised at £2 per share when the shares were worth £5, produced a taxable gain of £2,999.

The US number will not match that figure exactly, and it is not supposed to. The US measures the spread in dollars at the exercise date spot rate, and does not necessarily allow the same incidental deductions. Two accurate computations that differ is normal. A single computation used twice is an error, and it is the error we most often unwind when a founder brings us a prior year prepared by a UK-only accountant and a US-only preparer who never spoke to each other.

Sell to cover, net settlement and the ERS return the founder signs

Two mechanisms fund the UK tax on a vest. In sell to cover, the founder beneficially acquires all the vested shares and enough of them are sold on the market to reimburse the employer for the PAYE and National Insurance. In net settlement, the company simply delivers fewer shares and accounts for the tax on the gross number. The difference matters on the US return. Sell to cover is a disposal for US purposes: the shares sold have a basis equal to the value already taken into income at vest, so the gain or loss is usually small, but it is reportable on Form 8949 and Schedule D and it is short term. Net settlement produces no disposal at all, because the withheld shares were never delivered.

On the UK side, HMRC changed the reporting mechanics for net settlement in Employment Related Securities Bulletin 63, published at https://www.gov.uk/guidance/employment-related-securities-bulletin-63-january-2026. From April 2026 employers no longer complete two lines of information to report net settlement on the end of year return. Net settled awards are reported on a single line per employee, using the gross number of securities before any adjustment, in the Other_Options_V4 or Other_Acquisitions_V4 templates, and records supporting the tax accounting must be kept for the current tax year plus six years. The founder is usually the director who signs that return, which is why we treat it as part of the same engagement rather than as a payroll afterthought.

The scheme itself has to exist in HMRC's system before any of this works. GOV.UK guidance at https://www.gov.uk/guidance/tell-hmrc-about-your-employment-related-securities requires a non-tax-advantaged scheme to be registered by 6 July following the tax year in which the first reportable event happened, and an ERS return, or a nil return where there is nothing to report, by 6 July following the end of each tax year.

The 5 April versus 31 December problem nobody models

This is the gap that costs founders the most money, and almost no competing page works it through. The UK tax year runs from 6 April to 5 April. The US individual tax year is the calendar year. A single UK tax year therefore straddles two US tax years, and a single US tax year straddles two UK ones. Foreign tax credits are claimed on Form 1116, whose instructions at https://www.irs.gov/instructions/i1116 confirm that under the cash method the conversion rate for foreign taxes is the rate of exchange in effect on the day the foreign taxes were paid, while under the accrual method the average exchange rate for the tax year to which the taxes relate is used. Employment income and equity compensation sit in the general category, one of the five categories the instructions describe.

PAYE deducted at the moment of the vest is paid then, so it usually lands in the same US year as the income. The problem is everything that follows. UK Self Assessment reconciles the year after it ends, and any balancing payment for a UK year ending 5 April is due on the following 31 January, which is a different US calendar year from the vest. Payments on account fall on 31 January and 31 July, splitting again. On a cash basis, the credit follows the payment date, so a founder can report the full vest as income in one US year and pay a material slice of the corresponding UK tax in the next one. The result is an unusable excess credit in the vest year and a wasted deduction in the following year.

The repair is mechanical rather than clever. Unused foreign taxes carry back one year and forward ten years, per the Form 1116 instructions, and the carryback is the tool that most often rescues a vest year once the following January payment is known. Where the accrued basis is used instead of the paid basis, the instructions also warn that accrued taxes not paid within 24 months after the close of the year to which they relate reduce the credit until they are actually paid. That is a real risk on a disputed or amended UK return. And if UK tax that was credited is later refunded, the instructions require an amended US return reducing the credited amount, which is the foreign tax redetermination rule.

A worked illustration of a February vest

The following is an illustration only, using assumed figures and an assumed exchange rate of 1.27 US dollars to the pound held constant for clarity. Assume a US citizen founder of a UK company has 10,000 RSUs vesting on 20 February 2027, when the shares are worth £8.00 each, so £80,000 of value. The founder is already an additional rate taxpayer. UK income tax at 45 per cent is £36,000 and employee National Insurance at 2 per cent on earnings in the top band is £1,600, so roughly £37,600 is collected through PAYE in February 2027, which falls in the UK tax year ending 5 April 2027 and in US calendar year 2027.

So far the years align. Now assume the founder also has UK dividend and interest income, so the Self Assessment return for the year to 5 April 2027 shows a further £9,000 of UK tax payable on 31 January 2028. That £9,000 relates to a UK year that includes the vest, but on a cash basis it is a 2028 payment for US purposes. The founder reports roughly 101,600 US dollars of compensation in US 2027 and can credit only the February PAYE against it. The January 2028 payment sits in the wrong US year unless it is carried back. A founder who files the 2027 return in April 2028 without looking at what was paid three months earlier simply loses the benefit until it expires. In the returns we prepare, sequencing the two filings, rather than treating them as separate jobs, is what recovers it.

Sourcing: why the UK does not always tax all of it

Where the founder worked during the vesting period matters. For US purposes, multi-year compensation is sourced on a time basis, and for options the period to which the compensation is attributable generally runs from grant to the date the vesting conditions are satisfied. The IRS sets this out in its international practice unit on sourcing multi-year compensation arrangements at https://www.irs.gov/pub/fatca/int_practice_units/ftc_c_10_02_04.pdf, applying Treasury Regulation 1.861-4. The US-source proportion is total compensation multiplied by US workdays over total workdays in that period. The UK reaches a comparable outcome through Chapter 5B of Part 2 ITEPA 2003, which HMRC explains at https://www.gov.uk/hmrc-internal-manuals/employment-related-securities/ersm162200 is intended to establish the period to which securities income can be regarded as relating.

A founder who spent eighteen months of a three-year vesting period building the business from New York and eighteen months from London does not have a UK-source award. Roughly half of it is US source. If UK payroll withheld on the whole vest because the award landed on a UK payslip, and the US return was prepared on the assumption that all of it was foreign source, the founder has funded tax twice on the same value and claimed relief on neither side correctly. Treaty relief sits behind this. Article 14 of the UK/USA Double Taxation Convention deals with income from employment and Article 24 with relief from double taxation, as summarised in HMRC's Double Taxation Relief Manual at https://www.gov.uk/hmrc-internal-manuals/double-taxation-relief/dt19939d. The saving clause means US citizenship still pulls the whole award into the US net, so the credit, not the treaty exemption, is the working tool.

Newly arrived founders: the 4-year FIG regime and capped Overseas Workday Relief

A founder who moved to Britain recently may be a qualifying new resident. GOV.UK explains at https://www.gov.uk/guidance/check-if-you-can-claim-the-4-year-foreign-income-and-gains-regime that the four-year foreign income and gains regime applies from 6 April 2025 to individuals within their first four years of UK residence following at least ten consecutive tax years of non-UK residence, that it is claimed on the residence pages of the Self Assessment return, and that claiming it costs the Personal Allowance and the capital gains annual exempt amount. Employment income for duties performed outside the UK is dealt with through Overseas Workday Relief instead. HMRC's Employment Income Manual at https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim43600 confirms that from 6 April 2025 the relief is subject to an annual financial limit for each qualifying year of the lower of 30 per cent of qualifying employment income or £300,000.

For a founder with a large vest, that cap is binding almost immediately, and it changes the shape of the US credit. Relief that removes income from UK tax also removes the UK tax that would have been creditable in the United States. The same logic applies to the foreign earned income exclusion. The IRS states plainly at https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit that if you elect to exclude foreign earned income or foreign housing costs you cannot take a foreign tax credit for taxes on the income you exclude. On a large equity event the exclusion is usually the wrong lever, because the excluded slice is small relative to the vest and it disqualifies the credit that would otherwise have carried the whole liability.

When your own UK company is the issuer: Form 5471 and CFC reporting

This is the second gap. A founder is not only receiving equity, the founder is issuing it, and issuing it changes the cap table that drives the US information returns. The Form 5471 instructions at https://www.irs.gov/instructions/i5471 define a Category 4 filer as a US person who had control of a foreign corporation, meaning more than 50 per cent of the total combined voting power or more than 50 per cent of the total value of the shares. A Category 5 filer is a US shareholder who owned stock in a controlled foreign corporation, where a US shareholder owns 10 per cent or more of the combined voting power or value, and a CFC is a foreign corporation in which US shareholders own more than 50 per cent of vote or value.

Every one of those tests can move when options are exercised or RSUs settle. Dilution can take a founder below control and out of Category 4. New US-citizen shareholders crossing 10 per cent can create CFC status where none existed. Acquisitions and dispositions of qualifying stock during the year can pull a person into Category 3. The form is attached to the income tax return and filed by that return's due date including extensions, and the instructions set the failure to file penalty at $10,000 for each annual accounting period, with an additional $10,000 for each 30-day period after notice, to a maximum of $50,000. A founder who treats an equity round and a vesting event as company housekeeping, unconnected to the personal 1040, is the founder who discovers this three years later.

Reconcile the cap table at each date in the year, not only at the year end, because the Form 5471 category tests are tested at multiple points.
Track option grants and RSU awards to US-citizen holders separately, since they are what move the more than 50 per cent CFC test.
Check whether a controlled foreign corporation inclusion arises, and note that section 951A category income sits in its own Form 1116 basket.
Keep the UK statutory accounts, the ERS annual return and the Form 5471 schedules consistent, because they describe the same share movements.
Diarise the US filing to follow, not precede, the January UK Self Assessment payment, so the credit position is known before the return is signed.

FBAR and Form 8938 on the shares once they land

Vested shares have to go somewhere, and where they go creates reporting. If the plan administrator or broker holding them is outside the United States, that is a foreign financial account. The IRS comparison of the two regimes at https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements confirms the FBAR is required where the aggregate value of foreign financial accounts exceeds $10,000 at any time during the calendar year, is filed through FinCEN's BSA E-Filing System at https://bsaefiling.fincen.treas.gov, and is due 15 April with an automatic extension to 15 October. A single large vest can take a founder over $10,000 for the first time in a year when nothing else changed.

Form 8938 is separate and broader. The same IRS page sets the thresholds for taxpayers living abroad at more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year for single filers and those married filing separately, and more than $400,000 or more than $600,000 for a joint return. For taxpayers living in the United States the thresholds are $50,000 and $75,000, and $100,000 and $150,000 respectively. Critically for a founder, specified foreign financial assets include foreign stock or securities that are not held in a financial account. Shares in the founder's own UK company, held directly on the register rather than through a broker, are outside the FBAR definition of an account but squarely inside Form 8938.

National Insurance, US social security and the currency question

Wages paid by a UK company for duties performed in the United Kingdom generally sit in the UK National Insurance system rather than the US Social Security and Medicare system, and the US-UK totalization agreement exists precisely to stop the same earnings being charged twice. The IRS overview is at https://www.irs.gov/individuals/international-taxpayers/totalization-agreements. Where coverage is in question, a certificate of coverage evidences which system applies, and it should be on file before a large vest rather than after it.

Currency is the last piece, and the least glamorous. The IRS states at https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates that it has no official exchange rate, that in general you use the spot rate prevailing when you receive, pay or accrue the item, and that it accepts any posted rate used consistently. For a single, dated, material event such as a vest or an exercise, the spot rate on the event date is the defensible answer. Using an annual average for the compensation and a spot rate for the tax, or the reverse, manufactures a mismatch out of nothing, and it is the kind of inconsistency that is very hard to explain years later.

The failure modes we see most often

UK payroll withheld on 100 per cent of a vest that was only partly attributable to UK workdays, and the US return then treated the whole award as foreign source.
A February or March vest where the founder took no cash salary, the employer could not deduct the PAYE, and the 90-day make good deadline passed unnoticed.
A US return filed before the January UK Self Assessment payment was made, leaving a credit stranded in the wrong year with no carryback claimed.
Sell to cover shares omitted from Form 8949 because the founder assumed the transaction was withholding rather than a disposal.
A share plan or nominee account opened for the vest, taking the founder over the FBAR threshold for the first time, with no FBAR filed.
An option exercise that changed the cap table, moved the founder between Form 5471 categories, and was never picked up on the personal return.

None of these are exotic technical positions. They are sequencing and evidence failures, and they are fixable if the UK payroll record, the ERS return, the company cap table and the US return are prepared as one set of documents describing one set of events. For a US founder in Britain, the equity is usually the largest single number on the return in the year it vests. It deserves to be prepared once, properly, rather than twice, differently.