Can I put my RSUs into a pension? Advisers on dodging the £100k tax trap at vest

Financial experts and accountants say the way to get RSUs into a pension is to sell the shares and pay in the cash, warning that a vest can push tech employees “straight into the £100,000 personal allowance trap”, as income between £100,000 and £125,140 is effectively taxed at 60%.

Restricted stock units (RSUs) are a common part of pay for UK staff at large tech firms, with the shares handed over in batches as they vest over several years.

For typical schemes, the value of the shares at vest counts as employment income, with income tax and National Insurance usually deducted through payroll.

That income counts towards adjusted net income, the figure HMRC uses to decide whether someone keeps their £12,570 tax-free personal allowance.

The allowance goes down by £1 for every £2 of adjusted net income above £100,000, and disappears completely at £125,140, GOV.UK guidance shows.

Consequently, for taxpayers in England, Wales and Northern Ireland, every £1 earned between £100,000 and £125,140 costs 40p in higher-rate tax, plus a further 20p from the allowance lost, an effective rate of 60% before National Insurance.

Experts told Newspage that employees often assume holding the shares, or having tax taken through sell-to-cover, keeps the vest from causing problems at the £100,000 threshold.

They said the most effective route is to sell the shares and pay the cash into a pension, flagged the concentration risk of holding them, and urged employees to plan before the shares vest rather than after.

Can you put RSUs into a pension?

RSUs cannot go into a pension as shares, but an employee can sell them at or after vest and pay the cash in as a personal pension contribution.

Tax relief is available on contributions worth up to 100% of relevant UK earnings, with the pension provider adding basic-rate relief of 20% to the pot, and higher-rate taxpayers able to claim a further 20% through Self Assessment, GOV.UK guidance shows.

Contributions also sit within an annual allowance of £60,000, and any allowance left unused from the previous three tax years may be carried forward.

The allowance is reduced for the highest earners, those with threshold income above £200,000 and adjusted income above £260,000, falling to as little as £10,000, official guidance shows.

Harvey Dhillon, Founder & CEO at Zmartly, said: "No, not the shares: with RSUs you only get pension tax relief on money. At vest, the shares' value is taxed like pay, so getting it into a pension means selling and paying in the cash."

Do RSUs count towards the £100,000 threshold?

Yes, RSUs count as employment income in the tax year they vest, whether or not the shares are sold, so a single vest can take an employee on a salary below £100,000 over the line.

Daniel Hobbs, CEO at Rayleigh-based New Leaf Distribution, said: "RSUs are one of those lovely benefits where your employer says congratulations and HMRC says 'congratulations to us too'.

"For typical schemes the value at vesting is employment income, and that can matter enormously if it takes somebody through the £100,000 personal allowance taper. Sell-to-cover doesn't magically make the wider planning question disappear.

"Don't wait until the shares vest and then Google what just happened. If you know an award is coming, speak to an adviser or tax professional beforehand. Good tax planning is generally much more useful before the event than an autopsy afterwards."

How does sell-to-cover go wrong?

Sell-to-cover goes wrong when employees assume the shares sold at vest have settled their full tax bill.

Under sell-to-cover, the employer or scheme provider sells enough of the vested shares to pay the tax due through payroll, and the employee keeps the rest.

However, payroll deducts tax using the employee's tax code, which may not reflect the allowance lost above £100,000, leaving a shortfall to settle later.

Where tax on employee shares is not deducted through payroll, it has to be reported on a Self Assessment tax return.

Online returns, and any tax owed, are due by 31 January after the end of the tax year.

Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, said: "One of the most expensive mistakes tech employees make is treating RSUs as an investment bonus rather than taxable employment income.

"When RSUs vest, their taxable value generally counts as earnings, even if you haven't sold the shares. That can push someone straight into the £100,000 personal allowance trap.

"And here's the dangerous misconception: sell-to-cover doesn't necessarily mean your entire tax position is sorted. Employees need to reconcile their vesting statements, payroll deductions and any subsequent capital gains.

"Can you put RSUs into a pension? Generally, not directly. But selling shares and contributing cash can be a powerful planning opportunity, subject to pension allowances.

"My advice? Plan before vesting, calculate your total income, review pension contributions and understand the deadlines.

"The biggest financial mistake isn't receiving a large share award. It's allowing a predictable tax event to become an avoidable financial shock."

Vest pushing you over £100k: what are your options, and what's the deadline?

Pension contributions and Gift Aid donations both reduce adjusted net income, and for this tax year the money has to land by 5 April 2027.

Each £1 paid into a personal pension that receives basic-rate relief, or given to charity under Gift Aid, reduces adjusted net income by £1.25, according to HMRC. Higher-rate taxpayers can also claim back the difference on Gift Aid donations through Self Assessment or their tax code.

For example, an employee in England on a £95,000 salary whose RSUs vest at £25,000 would have an adjusted net income of £120,000, losing £10,000 of their personal allowance and adding £4,000 to their tax bill, Newspage calculations show.

By paying £16,000 into a personal pension, which the provider tops up to £20,000, they would bring adjusted net income back to £100,000 and restore the full allowance. That cuts their tax bill by £8,000, £4,000 from the restored allowance and £4,000 in higher-rate relief claimed through Self Assessment.

Dhillon added: "If a vest will push you over, pay cash into a personal pension first, then use Gift Aid on any giving you'd do anyway. 

"oth cut the income HMRC tests by more than you pay, because basic-rate relief is added on. The pension money must reach the scheme by 5 April 2027."

Should you hold the shares after vesting?

Holding the shares after vest is purely an investment decision, as the income tax is charged at vest either way, and the main risk is concentration, with salary, bonuses and investments all tied to one employer.

Graham Nicoll, Financial Planner, Chartered FCSI at NCL Wealth Partners, said: "RSUs can be a valuable reward, but without planning they can create an expensive tax headache. They're normally taxed as income when shares vest, potentially pushing earnings above £100,000 and triggering the personal allowance taper.

"You can't put unvested RSUs into a pension. Once vested, you can sell shares and contribute cash, benefiting from pension tax relief, subject to allowances. This can help bring adjusted net income below £100,000.

"Sell-to-cover pays withholding taxes, but check the final liability and keep vesting and payroll records.

"You can retain shares, but remember your salary, bonuses and investments could all depend on one employer. That's a lot of eggs in one basket.

"My advice? Plan ahead, check pension allowances and act before 5 April."