Introduction

I am UK Chartered Accountant and Practice Director at ESDG Accountancy. I have over a decade of experience, and work with many clients, often London based tech professionals, on dealing with the tax implications of their RSUs including at major tech companies like Amazon. I have wrote this article to provide clarity on understanding tax for Amazon RSUs, and provide some tax saving strategies for your consideration.

RSUs are increasingly commonly issued to UK tech employees, particularly those working for major US based firms like Amazon or AWS. Restricted Stock Units (RSUs) have become a significant part of the employees remuneration package, and offers a stake in the company they work for. However, understanding the tax implications of Amazon RSUs can be complex.

Please contact us if you need help with your RSU Capital Gains, Self Assessment or Tax Planning. If you are looking for our RSU Tax Calculator on vested RSU’s you can find it here: RSU Tax Calculator

What does an Amazon RSU Award look like?

Here is an example of what an Amazon RSU award may look like. This will detail shares which are promised to you or which have already vested.

The award will detail the scheme (award name), the date awarded, the number of shares and whether the shares have vested or not.

Typically the tax election will read “Sell for taxes” – this is a default option and means Amazon will automatically sell a proportion of your shares to cover the income tax implications of receiving these shares (read more on this below).

How Tax Works on Vesting and on Sale

What is Vesting?

When you accept a role at Amazon, you may be issued with a “Vesting Schedule” for Shares. This is essentially a promise by Amazon that they will “gift” you shares (in return for your hard work!) at agreed timeframes in the future. Typically this period may be over three years.

When shares “Vest” this means they become yours and you own the actual Shares. Typically these will be held in a Morgan Stanley which you should have access to.

Importantly, at point of vesting the shares become taxable.

Tax on Vesting

When Amazon RSUs vest, they are converted into actual shares of Amazon stock. At this point, the value of the shares received is considered taxable income.

This income is taxed in a similar way to if you receive the same value of shares as additional salary or bonus. I.e. if you received 100 shares worth £50 each, for a total value of £5,000, then you would be taxed on your next payslip in a similar fashion to if you received a £5,000 bonus.

The shares which have recently vested will typically show on your next payslip.

You can view the RSU Tax Calculator we have created for an estimate of your tax liability.

Why is the tax so high?

Many employees are surprised how high the tax rate is on RSU’s. This is often because RSU’s are taxed at your marginal rate of tax, as your personal allowance and basic rate band has already been utilised by your salary.

This tax rate could be as high as 45% for income tax, in addition to 9% student loan repayments as well as a National Insurance component. In total we regularly see an effective tax rate of 60% or higher.

Tax on Sale – Capital Gains

When you eventually sell the Amazon shares, any increase in value from the time of vesting (i.e. the price at the time you received them) to the time of sale is subject to Capital Gains Tax (CGT). Here’s how it works:

Acquisition Cost: The acquisition cost is the market value of the shares at the time of vesting. You have already been taxed on this value (see above). If multiple RSUs have vested it is more complex as the acquisition cost for tax purposes must be calculated under HMRC Share Matching rules – this is similar to average weighted cost with some quirks.
Capital Gain: The gain is calculated as the difference between the sale price and the acquisition cost.
Annual Exemption: Each individual has an annual CGT exemption (£3,000 for the 2024/25 tax year or £6,000 for the 2023/24 tax year). Gains above this threshold are taxed at 10% (basic rate) or 20% (higher rate).

For example, if you sell the shares when the price has increased from £50 to £75 per share, the gain per share is £25. If you sell 100 shares, the total gain is £2,500. If you have already utilised your annual exemption, then this amount would typically be taxed at 20% and therefore £500 of capital gains would be payable.

Tax-Saving Strategies for RSUs

To reduce your tax liability on Amazon RSUs, consider the following strategies:

1. Timing the Sale of Shares

Carefully plan when to sell your shares to make the most of your annual CGT exemption. By spreading the sales over multiple tax years, you can take advantage of the exemption each year. Currently the annual exempt amount is £3,000 per year.

2. Move the shares into an ISA

Investing in tax-efficient vehicles like Individual Savings Accounts (ISAs)can reduce your ongoing tax burden. ISAs are free from Capital Gains and Income/Dividend tax. Currently you can invest up to £20,000 per year in an ISA. Although you cannot directly transfer Amazon shares into these accounts, you can sell shares and then use the proceeds to repurchase within an ISA wrapper. It is your choice if you wish to stay invested in Amazon at this point or diversify your portfolio with other investments – we refer many clients to financial advisors who can help here.

3. Make a pension contribution

If you have no pressing need for the value held within your Amazon RSUs you may wish to consider making a pension contribution. As with the above ISA example, you can sell your RSUs and repurchase them (or other investments) within a SIPP (Self Invested Private Pension). This can give you a tax rebate of up to 60%. I.e. a £4,000 contribution would deliver £6,000 of tax relief.

4. Gifting Shares to a Spouse

You can also transfer some of the shares to a legal Spouse where appropiate, which will allow you to take advantage of their £3,000 annual exempt about for capital gains.

Conclusion

The tax implications of Amazon RSUs requires careful planning and strategy. ESDG Accountancy work with a large number of Tech professionals who work at Amazon and similar companies – we assist with Self Assessment needs, Capital Gains calculations and tax planning.

Please contact us today if you think we can assist you with your tax or accounting requirements:

This article is intended to provide a general understanding of the taxation of Amazon RSUs and is not a substitute for professional or financial advice. Tax laws and rates are subject to change, and individual circumstances can vary.