Salary, Bonuses and RSUs Across the US–UK Border

Sourcing: pay belongs where the work happened

Both systems start from the same principle: employment income is sourced to where the work is physically performed, day by day. Article 14 of the treaty confirms the work country's right to tax, with a narrow short-stay exception for brief presences where the pay is not borne in the work country. A bonus for a year split between London and New York is therefore split by workdays; so is salary for a commuter pattern; so, crucially, is equity compensation earned over a multi-year vesting period.

For a US citizen, sourcing never removes US tax — citizenship taxation covers everything — but it decides how much the other country may tax, and therefore how much credit exists to relieve the overlap. Workday records are the raw material of the whole calculation; people who keep a travel calendar save themselves money and argument every filing season.

RSUs: one award, two timelines

Restricted stock units compress every cross-border difficulty into a single instrument:

• Different events. Each country decides for itself when the award becomes taxable and how much of it belongs to service performed on its soil — and after a move, both will typically claim the slice of each vest attributable to workdays in their country during the vesting period.
• Different values. The taxable amount is measured at each country's own taxing point, in its own currency, at its own exchange rate. The same vest can enter the two returns at genuinely different figures without either being wrong.
• Different years. A vest in, say, February falls into one US year and a different UK year, and withholding lands in each system on its own schedule — the calendar mismatch at its worst.

Options add a further layer, since grant, vest and exercise are all candidate taxing points and the countries do not choose the same ones in all cases. The only reliable approach is grant-by-grant: for each award, a sourcing calculation across the vesting period, a value at each country's taxing point, and a reconciliation of what each payroll withheld.

Credits: where the mismatches surface

Because both countries tax overlapping slices at different times and values, the foreign tax credit has to be assembled deliberately: matching the UK tax on a vest to the US tax on the same vest across the year boundary, converting at defensible rates, and dealing with employer withholding that rarely aligns with the final liability in either country. Done casually, the same vest gets taxed twice for years and reconciled never. Done properly, the outcome usually lands where it should — total tax near the higher of the two systems — but "usually" is earned, not automatic.

Assignees: equalisation and hypo-tax

Employers moving staff across the Atlantic often wrap all of this in tax equalisation: the employee bears a hypothetical tax — hypo-tax — approximating what they would have paid had they stayed home, deducted from pay, while the employer funds the actual liabilities in both countries. Variants (protection rather than equalisation, capped policies) exist. Two things matter for the individual: real returns are still filed in both countries in your name, so errors are still your errors; and equalisation settlements, gross-ups and employer-paid tax are themselves taxable compensation that feeds back into both systems. Assignees should understand their policy before the first payslip, not at the first filing deadline.

Social security is decided separately

National Insurance and US Social Security do not follow the income tax analysis. The totalization agreement assigns coverage to a single country — commonly the home country for temporary assignments, evidenced by a certificate of coverage — so the same salary can be income-taxed in one country while contributions are due in the other. The mechanics, and how split careers combine records later, are covered in Social Security and the State Pension.

The habit that makes this manageable

Cross-border pay rewards contemporaneous records: a workday calendar, grant documents, each vest's statements from both payrolls, and the exchange rates used. With those, the two returns can be built from one consistent model of each award. Without them, every vest becomes an archaeology project — and the credits that depend on the details are the first casualty.