UK Engineer Transfers to Meta US: Trailing UK Tax on Pre-Move Equity
A Meta engineer transferred London to Menlo Park mid-vest. HMRC claimed trailing UK tax on equity earned during UK service. Here is how the treaty worked out.
James is a Meta engineer who transferred from the London office to Menlo Park in June 2024. His UK tenure was 3.5 years at Meta, during which he accumulated 1,800 RSUs across three grants. He moved to Menlo Park on a work visa, changed his residence, and became a US resident in July 2024. His US W-2 for 2024 showed Meta’s full RSU vest as US wages. His UK self-assessment, filed February 2025, showed HMRC wanted a share. Both countries claimed taxing rights, and the double tax situation needed sorting.
Situation
His equity:
- Grant A: 600 RSUs granted March 2021, quarterly vest, 3-year vest fully completed by March 2024. All 600 vested during UK service.
- Grant B: 700 RSUs granted March 2022, quarterly vest, fully vested by March 2025. Partially UK service, partially US service post-move.
- Grant C: 500 RSUs granted March 2023, quarterly vest, fully vested by March 2026. Split across UK/US service.
2024 vests:
- Q1 2024 (March, UK): Grant A final tranche (150), Grant B (175), Grant C (125). Total 450 shares. Priced at £385 × $1.27 = ~$489/share. Vest value: ~$220,000. UK service attribution: 100% (he had not moved yet).
- Q2 2024 (June, UK/US transition): 300 shares. Priced at $515. Vest value: $154,500. Attribution question: he moved June 15. Workdays in UK: 55 of 62. UK attribution: 89%.
- Q3 2024 (September, US): 200 shares at $540 = $108,000. Attribution: Grant A fully UK, Grants B and C partial.
- Q4 2024 (December, US): 250 shares at $585 = $146,250.
Total 2024 RSU income: ~$629,000.
UK tax framework:
- UK tax domicile: he was UK-domiciled, non-US-resident until June 2024. From June 2024, US resident and UK non-resident.
- HMRC rules: RSUs taxed on vest (for UK residents) or on vest to the extent of UK service (for non-residents).
- Pre-move vests (Q1 2024, UK-resident): fully UK-taxable. Tax at 45% top rate plus 2% NI = 47%.
- Transition-period vests (Q2 2024): UK-taxable based on UK workdays during the grant-to-vest period. For Grant A (fully UK tenure), 100% UK. For Grants B and C (started in UK, vested after move), workday ratio applies.
- Post-move vests (Q3, Q4): UK-taxable only for the portion attributable to UK workdays during grant-to-vest period.
US tax framework:
- US resident from July 2024 taxable on worldwide income from that date.
- Foreign tax credit (FTC) available for UK tax on the UK-sourced portion, under US-UK treaty Article 23 and IRC §901.
- The FTC prevents double taxation but requires careful sourcing.
Calculating UK trailing tax:
- Grant A Q1 2024 vest (fully UK service, UK resident at vest): UK tax owed on $220k × 47% = $103,400.
- Grant B vests over UK/US periods: UK portion = (UK workdays in grant-to-vest period) / (total workdays). For Q2 2024 vest at the transition, approximately 95% UK. UK tax on that portion.
- Grant C vests continuing into 2025 and 2026: UK portion decays with each vest as US workdays accumulate.
Total UK tax owed on 2024 vests: approximately $145,000.
What we modeled
Three questions:
- How to properly allocate income between UK and US for 2024.
- How to claim the foreign tax credit in the US return.
- How to coordinate Meta’s withholding (which was US-biased post-transfer).
Meta’s withholding post-transfer was 100% US. The US supplemental rate (22/37) was applied to his Q3 and Q4 2024 RSU vests. The Q1 UK vest was withheld at UK PAYE rates (partly transitional). The Q2 transition vest was messy: Meta’s UK payroll handled some, US payroll handled the rest, and neither side was fully correct on the split.
Allocation model:
| Vest | Total value | UK workday allocation | US workday allocation |
|---|---|---|---|
| Q1 2024 (UK) | $220,000 | 100% | 0% |
| Q2 2024 (transition) | $154,500 | 89% (grants A+B+C weighted by UK workdays) | 11% |
| Q3 2024 (US) | $108,000 | ~58% (Grant A full UK clock, B/C partial) | ~42% |
| Q4 2024 (US) | $146,250 | ~52% | 48% |
UK-sourced income: approximately $420,000. US-sourced income: approximately $209,000.
Total US reported income: $629,000 (US taxes worldwide for his resident period, July 2024 onward, plus he was UK-resident before July so pre-July vests were not US-reportable except as covered by the US-UK treaty “dual-status” rules).
Actually the dual-status filing is crucial. He was a dual-status alien for 2024: non-resident from January to June, resident from July to December. Dual-status aliens report only US-source income for the non-resident period and worldwide income for the resident period. Pre-July 2024 RSU vests were not US-reportable unless they were US-source (they were not, he was working in UK). Post-July 2024 vests were US-reportable, with foreign tax credit for UK tax on UK-sourced portions.
What he did
He filed a dual-status return for 2024:
- Form 1040 for the resident period (July-December 2024).
- Form 1040-NR for the non-resident period (January-June 2024).
- Schedule OI explaining the dual-status year.
- Form 1116 (Foreign Tax Credit) for the UK tax paid on UK-sourced post-July income.
UK self-assessment filed in February 2025 paid UK tax on all UK-sourced income. Total UK tax on 2024 vests: approximately $132,000 (after refinements from the initial estimate).
US tax on his resident-period income:
- US wages (Jul-Dec 2024): $312,000 (half-year base, bonus, post-July vests, etc.).
- Federal tax before FTC: ~$73,000.
- Foreign tax credit for UK tax on the post-July UK-sourced portion: approximately $25,000.
- Net US tax: ~$48,000.
- California: $28,000 (CA generally does not allow FTC, so full CA tax on CA-sourced income without credit).
For 2025 onward, he would file a normal resident return, reporting worldwide income. Continued UK tax on UK-workday-sourced vests from Grants B and C would be creditable on US return.
What he wishes he had done differently
He did not consult a US-UK tax advisor before the transfer. Meta offered general relocation tax equalization support, but the equalization was structured to protect him only for base salary and immediate relocation expenses. Equity mechanics were outside the scope of standard equalization. A specialist would have walked through the dual-status year, workday sourcing, FTC limits, and NY vs CA exit-tax implications (not applicable here) before the move, saving him weeks of cleanup.
He also did not track his UK workdays precisely for the grant-to-vest period. The UK HMRC and the US IRS both respect workday-based sourcing, but both require documentation. He reconstructed workdays from Outlook calendars and Slack logs, which was tedious but accurate. Keeping a daily work-location log during the transition year would have made the filings cleaner.
Third: he did not exercise his ISOs (he had a small ISO grant predating his RSU-heavy comp structure) before the move. UK tax treatment of ISOs is very different from US treatment; UK treats option exercises as income immediately, not at favorable capital gains. Exercising while UK-resident would have triggered UK ordinary income tax on the full spread, at 47%. Waiting until US resident preserved the US-favorable ISO treatment (AMT at exercise, capital gains on sale). He did wait, which was correct, but he was not confident of the reasoning at the time.
Fourth: he did not address the UK National Insurance contribution issue. NI is UK’s social security tax. Pre-move, he paid UK NI on his wages. Post-move, he paid US FICA. The US-UK Totalization Agreement coordinates the two systems, but a certificate of coverage (CoC) was needed to confirm he was not double-charged for any transition-period income. Without a CoC, his UK employer had paid UK NI on the UK-sourced Q2-Q4 2024 vest portions, and Meta’s US payroll had paid FICA on the same. Filing a CoC claim with HMRC refunded the double-paid NI.
Frequently asked
How does UK tax RSUs when the employee was UK-resident during the grant?
UK taxes RSU vest income based on UK workday allocation during the grant-to-vest period, similar to US state sourcing. Post-move vests are partly UK-taxable for the UK-workday portion.
What is the US-UK tax treaty rate for employment income?
Treaty Article 14 sources employment income to the country where services were performed. No reduced rate; taxed at each country’s normal rates with FTC to avoid double taxation.
What is a dual-status alien for US tax purposes?
Someone who is a US resident for part of a year and a non-resident for the other part. Dual-status returns use Form 1040 for the resident period and Form 1040-NR for the non-resident period, filed together.
Can I claim the Foreign Tax Credit for UK tax on my RSU income?
Yes, for the portion of US-reported income that was also UK-taxed. Form 1116 is used. Limitations apply based on the relative proportion of foreign-source vs. US-source income.
What about California?
California does not allow FTC for foreign tax paid. If you are a CA resident paying UK tax on UK-sourced income that CA also taxes, you may face effective double state-level taxation. The fix is usually to confirm the sourcing cleanly attributes to one jurisdiction at the state level.
Composite scenario drawn from common patterns in our advisor network's casework. Names, companies, and exact numbers are illustrative. Not tax, legal, or investment advice.