What are RSU stock options?

The term restricted stock unit (RSU) refers to a form of compensation issued by an employer to an employee in the form of vested company shares.

Also known as equity compensation, employees who receive this perk gain a stake in the company employing them. This means they have partial ownership of the business and its profits. Start-ups that can’t afford to pay big salaries often include some form of stock benefits in their hiring packages to attract and motivate employees.

The ‘restricted’ – or ‘vested’ – element refers to the terms that can be associated with the allocation of RSUs, such as length of employment or performance goals. RSUs (or vested shares) can lead to very large capital gains if companies thrive. Unlike stock options, RSUs always have some value to you, even when the stock price drops below the price on the grant date.

Employee Share Plans

There are a number of types of employee share plans, some of which have beneficial tax positions for the employees and others that are simply taxed as salary, subject to certain rules. Stock secured via employee share plans may decrease as well as increase in value.

Stock Options

Unlike RSUs and share plans, stock options are purchased by employees at a predetermined price, at a specific time.

Expert RSU and share option support

The re:accounts team helps individuals who receive RSUs or shares as part of their remuneration package. This requires precise tax planning on your behalf … something we love to do! We help you by calculating and understanding:

  • The effect of relevant tax events
  • How to utilise personal allowances
  • Portfolio diversification
  • Allocation of any brought forward losses
RSUs vs Share options: A Summary

Stock options and RSUs are both popular forms of equity compensation and a key driver in the attraction and retention of employees.

With stock options, employees are given the right to purchase shares at a set time for a predetermined price. Capital Gains Tax may be payable when the shares are sold.

An RSU is a promise from your employer to provide you with the company’s shares in the future on a certain date. When these shares vest (pass to you), you are subject to both Income tax and NIC (National Insurance Contributions).

Have you been offered shares or RSUs as part of your remuneration?

Are you considering stock options for your employees?

Contact us for an informal discussion about the options involved and what’s best for your company. No jargon, just honest, helpful advice. Talk to re:accounts.

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