WARNING: If You Earn Over £200,000 and Receive RSUs, There's a Good Chance
You Already Owe HMRC Tens of Thousands of Pounds
And the longer you wait to find out, the worse the interest and penalties get!
THE RSU PENSION TRAP
How RSU vesting can trigger a 45% hidden tax charge that nobody catches
I’ve worked with dozens of senior professionals who receive RSUs as part of their compensation:
Engineers at Google. Product managers at Meta. Senior VP’s at Genpact.
High salaries and large RSU Awards. Sensible people who max out their pensions because that’s what you’re supposed to do.
And I keep finding the same problem: They’ve been breaching their pension annual allowance for years and don’t know it. The charge can run into tens of thousands, across multiple years.
If you earn over £200,000 and receive RSUs, this is what you need to understand.
The Two Tests You Need to Know
The standard pension annual allowance is £60,000. The taper reduces it for high earners. BUT it only kicks in if you pass two tests:
TEST 1: THRESHOLD INCOME
Total taxable income (salary + bonus + RSU vesting + other income) minus your personal pension contributions.
If this is £200,000 or less, you’re in the clear. Full allowance available.
TEST 2: ADJUSTED INCOME
Threshold income plus all pension contributions (yours and your employer’s).
If this is £260,000 or less, you’re still clear.
If it’s above £260,000, the taper applies.
For every £2 of adjusted income above £260,000, you lose £1 of allowance. The minimum is £10,000 (at £360,000 adjusted income or above). (in its own box underneath the two test boxes)
If your contributions exceed the reduced allowance, the excess is taxed at your marginal rate, typically 45%.
The critical point: your RSU vesting counts as taxable income.
A strong vesting year can push you over these thresholds even if your salary alone wouldn’t come close.
How to know if there’s a hefty tax bill waiting for you?
Tom and Sanjay both work at a large tech firm. They both receive RSUs and contribute to their pensions. One of them has a tax problem that’s about to cost them a fortune.
Salary | £150,000 |
RSU vesting | £40,000 |
Employee pension contribution | £20,000 |
Employer pension contribution | £20,000 |
Tom’s threshold income (total earnings minus his personal pension contributions) is £170,000.
That’s below the £200,000 gateway, so the taper doesn’t touch him.
He keeps the full £60,000 allowance.
His total contributions are £40,000. So there’s no breach or charge.
Tom is fine.
Salary | £180,000 |
Bonus | £50,000 |
RSU vesting | £80,000 |
Employee pension contribution | £40,000 |
Employer pension contribution | £20,000 |
Sanjay earns more, and he’s doing the sensible thing by maximising his pension. But his numbers tell a different story.
His RSU vesting pushes him well past both taper thresholds. That £60,000 annual allowance he thinks he has? It’s actually £25,000.
He’s been contributing £60,000 a year. That’s £35,000 over his real limit.
Tax charge: £15,750. Every single year.
Three years of this building up quietly? That’s £47,250 before HMRC adds interest and penalties.
Nobody told him.
RSU CALCULATOR
Check whether your RSU vesting is triggering a breach in under 60 seconds.
This calculator provides a general illustration based on the 2025/26 tax year rules and is not personal financial advice. It does not account for salary sacrifice pension arrangements, which have different mechanics. The annual allowance charge may be reduced or eliminated by carry forward of unused allowance from the previous three tax years, which requires a detailed year-by-year analysis. Individual circumstances vary. Tax rules can change. You should seek professional advice before making financial decisions based on these figures.
Why Even Diligent, Well-Advised Professionals End Up With Years of Hidden Pension Breaches
The system isn't designed for someone whose income comes from salary, bonus, and RSU vesting all at once. No single adviser sees all three - which means no single adviser catches the problem.
Your employer:
handles your RSU vesting but isn't keeping tabs on whether you've hit the taper.
Your accountant:
(if you have one) probably doesn't have the full picture of what's vesting and when.
Your pension provider:
happily accepts contributions with zero idea what you're earning in total.
Nobody's talking to each other, so nobody spots the problem. Meanwhile, the breach keeps growing in the background, year after year, completely under the radar. If this is happening now, it's almost certainly been happening for a while. And HMRC can look back through previous years, with interest on anything you owe.
But There's Good News...
There’s something called “carry forward”, which lets you use unused pension allowance from past years to offset those historic breaches.
The catch? It needs exact numbers for every year involved.
And it takes hours of digging through your finances from the last 5 or more years.
Knowing you owe HMRC money is one thing. Getting the number wrong is quite another!
An incorrect calculation doesn’t just fail to solve the problem – it can make it significantly worse.
I can show you exactly how to arrive at a number you can stand behind.
Click the link below to book your FREE DISCOVERY CALL!