Introduction: Why a 10b5-1 Trading Plan Is a Tax Decision in London
A 10b5-1 trading plan lets a director, officer or senior employee of a US-listed company sell shares on a pre-agreed schedule, even when they later learn something the market does not know. Securities lawyers design these plans to protect the insider from accusations of trading on inside information. Tax barely features in that conversation. For an American living in London, however, the schedule written into the plan decides which UK tax year each gain falls into, which US tax year it falls into, whether the UK tax can be credited against the US tax at all, and how much of the 3.8% net investment income tax becomes a permanent cost.
Every leading page on this subject is written for a US resident. The wealth-management guides explain price limits and diversification. The law-firm summaries explain cooling-off periods and disclosure. The tax-strategy blogs explain long-term capital gains brackets and state tax. Not one of them mentions HMRC, the UK share-matching rules, the sterling cost basis or the mismatch between a 6 April tax year and a 1 January tax year. Yet that mismatch is exactly where a London-based executive can pay tax twice on the same sale.
This guide is written for American executives, founders and senior employees of US-listed companies who live in Britain, and for dual national US UK professionals who hold US stock awards. We explain how a 10b5-1 trading plan works under the 2023 SEC rules, how each side of the Atlantic taxes the sales, and how to draft the schedule so that the UK tax actually offsets the US tax. Moreover, we work through a full case study with real numbers. At TaxYork, we prepare the US and UK returns that sit behind these plans every year, so the timing points below come from the returns themselves rather than from theory.
How a 10b5-1 Trading Plan Works Under the 2023 SEC Rules
What a 10b5-1 Trading Plan Actually Is
A 10b5-1 trading plan is a written contract, instruction or plan, usually with a broker, that specifies the amount, price and date of future sales, or a formula that determines them. Once it is adopted in good faith while the insider holds no material non-public information, later trades under it carry an affirmative defence to insider trading liability under SEC Rule 10b5-1. The key point is that the insider cannot influence the trades after adoption. The broker executes them, and the insider simply watches.
For most American executives in London, the shares come from restricted stock units or options granted by a US parent. A 10b5-1 trading plan lets them diversify a concentrated position steadily rather than waiting for short open trading windows. In addition, it lets them sell during quarterly blackout periods that would otherwise stop all trading. As a result, a large part of a senior executive's annual liquidity often flows through the 10b5-1 trading plan.
Cooling-Off Periods, Overlapping Plans and Single-Trade Limits
The SEC tightened the rule with amendments adopted in December 2022, which took effect on 27 February 2023. Directors and officers must now wait for a cooling-off period of the later of 90 days after adoption, or two business days after the company files its Form 10-Q or 10-K for the quarter in which the plan was adopted, capped at 120 days. Other employees wait 30 days. Furthermore, an insider generally cannot run overlapping plans, and can use only one single-trade plan in any 12-month period. The SEC's final rule release on insider trading arrangements sets out the full detail.
Two exceptions matter for executives with stock awards. First, a sell-to-cover arrangement that sells only enough shares to meet tax withholding on vesting does not count as an overlapping plan. SEC staff guidance issued in 2025 confirmed that the amount need not be the statutory minimum and can reflect a good-faith estimate of the insider's expected effective tax. Second, a 10b5-1 trading plan can be modified, but any change to amount, price or timing is treated as terminating the old plan and adopting a new one, which restarts the cooling-off clock. Consequently, the tax timing must be built in at the start, because fixing it later costs at least 90 days.
Disclosure and Reporting on the Securities Side
Directors and officers report each sale on Form 4 within two business days, and the form now carries a checkbox showing whether the trade was made under a 10b5-1 trading plan. Affiliates selling control or restricted securities also file a notice on Form 144 when sales in any three months exceed 5,000 shares or $50,000, and they remain subject to the Rule 144 volume limits. In addition, the company discloses each officer's adoption and termination of a plan in its quarterly filings. None of these filings is a tax filing, and none of them tells HMRC or the IRS anything about your cost basis. That work sits entirely with your US and UK returns.
How the IRS Taxes Sales Under a 10b5-1 Trading Plan
Capital Gain, Holding Period and Specific Lot Identification
A sale under a 10b5-1 trading plan is an ordinary sale of stock for US purposes. The plan grants no deferral and no special rate. Gain is the dollar proceeds less your dollar basis, and for vested RSUs that basis is the market value already taxed as wages at vesting. Shares held more than one year produce long-term gain at 0%, 15% or 20%, while shares held a year or less produce short-term gain taxed at ordinary rates up to 37%, as the IRS explains in Topic 409 on capital gains.
The US also allows specific identification of lots. If the 10b5-1 trading plan tells the broker which lots to sell, you can choose high-basis lots or lots that have passed the one-year mark. This matters far more for an expatriate than for a domestic investor, as we explain below, because a short-term gain is the one situation in which US tax regularly exceeds UK tax on the same disposal.
The 3.8% Net Investment Income Tax
Gains from sales under a 10b5-1 trading plan are net investment income. Above $200,000 of modified adjusted gross income for a single filer, or $250,000 for a joint return, the net investment income tax adds 3.8%. For an American in Britain this is the most expensive line in the whole calculation, because UK tax cannot be credited against it. On 31 August 2026 the Federal Circuit confirmed in companion decisions that treaty foreign tax credits reach only the regular income tax, and the 3.8% sits outside it. Therefore every dollar of gain above the threshold carries a 3.8% US cost that the UK tax can never touch.
Sourcing: The 10% Test That Decides Whether the Credit Works
The foreign tax credit only offsets US tax on foreign-source income. Under section 865 of the Internal Revenue Code, gain on personal property such as shares is generally sourced by the seller's residence. A US citizen whose tax home is in London is treated as a non-resident for this purpose, so the gain is foreign source, but only if a foreign income tax of at least 10% of the gain is actually paid. At the UK's 24% higher rate, a normal London executive clears this test easily. However, the test fails when UK tax is reduced to near zero, for example by losses, by the UK's four-year foreign income and gains regime, or by a large sterling cost basis. In that case the gain becomes US source, and no credit is available against the US tax.
How HMRC Taxes Sales Under a 10b5-1 Trading Plan
UK Capital Gains Tax Rates and Reporting
A UK resident pays capital gains tax on worldwide disposals, and shares in a US-listed company are no exception. For 2026/27 the rates on shares are 18% within the basic rate band and 24% above it, and the annual exempt amount is just £3,000, according to gov.uk's capital gains tax rates page. Gains are reported on the Self Assessment return, and the tax is due on 31 January after the end of the tax year. You must report disposals with total proceeds above £50,000 even if no tax is due, and HMRC explains the routes on its page about how to report and pay capital gains tax.
Notably, capital gains tax is not included in UK payments on account. A large year of sales under a 10b5-1 trading plan therefore produces one single balancing payment on 31 January, often many months after the shares were sold. That date matters greatly on the US side, as the timing section below shows.
Share Matching Replaces Specific Lot Identification
Britain does not let you choose which shares you sold. Instead, disposals are matched first with shares acquired on the same day, then with shares acquired in the following 30 days, and only then with the section 104 pool, which averages the cost of everything else, as HMRC's Capital Gains Manual at CG51560 sets out. The 30-day rule sits in section 106A of the Taxation of Chargeable Gains Act 1992.
For an executive with quarterly RSU vesting, this has a practical consequence that no plan template mentions. If your 10b5-1 trading plan sells shares and a new tranche vests within the next 30 days, HMRC matches the sale with the newly vested shares, whose UK base cost is their value at vesting. The gain reported to HMRC can therefore be quite different from the gain on your US return, where you chose specific lots. As a result, two returns built from the same broker statement routinely show two different gains.
The Sterling Cost Basis and Currency Distortion
HMRC computes the gain in sterling. The proceeds are converted at the exchange rate on the sale date, and each acquisition cost is converted at the rate on its own acquisition date. The IRS computes the gain in dollars. So if sterling strengthened against the dollar between vesting and sale, the UK gain shrinks while the US gain does not, and the reverse happens when sterling weakens. In a year of large currency movement, the UK tax can fall below 10% of the dollar gain on lots with modest growth, which flips those gains to US source under the test above. Our guide to which exchange rate to use on US and UK returns covers the conversion rules in more depth.
The Timing Mismatch Hidden in Every 10b5-1 Trading Plan
Two Tax Years That Never Line Up
The UK tax year runs from 6 April to 5 April. The US tax year is the calendar year. Every sale under a 10b5-1 trading plan therefore lands in one UK year and one US year, and those years end at different times. That would not matter if the foreign tax credit simply followed the gain. It does not. The credit follows the foreign tax, and the rules on when foreign tax counts are strict.
Cash Basis: Credit Only When the Tax Is Paid
Most individuals claim the foreign tax credit on the cash basis. Under Treasury Regulation 1.905-1, a cash-method taxpayer may claim the credit only in the year the foreign tax is paid. UK capital gains tax on a sale in September 2026 belongs to the 2026/27 tax year, which ends on 5 April 2027, and is paid on 31 January 2028. On the cash basis that credit sits in the 2028 US return, while the gain sat in the 2026 US return. Excess credits carry back only one year and forward ten, so a 2028 credit can reach back to 2027 but never to 2026. The executive pays full US tax on the 2026 gain and full UK tax on the same gain, and is left with a credit that can only be used against future foreign passive income.
Accrual Basis: Credit When the UK Year Ends
The alternative is to elect the accrual method for foreign taxes under section 905(a). Regulation 1.905-1(d) provides that a foreign tax computed on a foreign taxable year accrues in the US taxable year with or within which that foreign year ends. The UK year ending 5 April 2027 ends within US 2027, so the UK tax on a September 2026 sale accrues in 2027, one year after the gain. A one-year carryback then reaches 2026, which works, but the 2026 return must still be amended or filed late with a carryback claim. Note that the election, once made, binds every later year.
The January-to-April Window
There is, however, a cleaner answer that only the schedule in a 10b5-1 trading plan can deliver. A sale between 1 January and 5 April falls into US year X and into the UK year ending 5 April of year X. Under the accrual method the UK tax accrues in the same US year as the gain, so the credit and the gain sit on the same Form 1040 with no carryback at all. Even on the cash basis, the UK tax is paid the following January, and the one-year carryback reaches the year of the gain. Consequently, an executive who loads the larger tranches of a 10b5-1 trading plan into the first quarter of the calendar year aligns both systems. Sales from 6 April to 31 December are not forbidden, but they need the accrual election and a carryback to avoid double tax.
This is the single most valuable design point for a London-based insider, and it costs nothing. The 10b5-1 trading plan already specifies dates. Choosing February and March instead of September and October changes nothing on the securities side while changing everything on the tax side. Our US tax returns for expats service builds this calendar with you before the 10b5-1 trading plan is signed.
RSUs, Sell-to-Cover and the 10b5-1 Trading Plan
Vesting Income Comes First
Most shares sold through a 10b5-1 trading plan began life as restricted stock units. When an RSU vests while you work in Britain, the value is employment income in both countries: PAYE income tax and National Insurance in the UK, and wages on the US return. The later plan sale only taxes growth after vesting. Our detailed guide to cross-border RSU tax on UK vesting explains the workday sourcing that applies to the vesting income itself.
Sell-to-Cover Sales and the Same-Day Rule
A sell-to-cover sale on the vesting date usually produces a tiny gain or loss in both countries, because the base cost and the sale price are almost identical. For the UK, the same-day rule matches those sold shares with the shares acquired that day, so the section 104 pool is untouched. For the US, the sold lot is the newly vested lot. However, the SEC's sell-to-cover exception covers only sales needed for tax withholding. An executive whose UK PAYE is collected through payroll rather than by share sales may find the broker's default sell-to-cover sized for US withholding, which can leave UK tax short and require a separate settlement through the payroll.
Short-Term Gains Create a Residual US Charge
A newly vested share sold under a 10b5-1 trading plan within twelve months produces short-term gain in the US, taxed at up to 37%. The UK taxes the same gain at 24% at most. As a result, a slice of US tax remains after the credit on every short-term lot. That is why the specific lot instruction in a 10b5-1 trading plan should normally direct the broker to sell lots held for more than a year first, because the UK is indifferent to holding period while the US rate falls from 37% to 20%.
Wash Sales and the 30-Day Rule Inside a 10b5-1 Trading Plan
When a Plan Sale at a Loss Meets a Vest
Sales under a 10b5-1 trading plan are not always gains. When the share price falls, a scheduled sale can produce a loss, and a new RSU tranche vesting within 30 days before or after that sale is an acquisition of substantially identical stock. Under section 1091 of the Internal Revenue Code, the US loss is then disallowed and added to the basis of the new shares. Meanwhile, the UK 30-day rule only looks forward and applies to gains and losses alike, so the two countries reach different answers on the same facts.
Designing Around the Overlap
The practical fix is to keep loss-making tranches out of the 30-day windows around vesting dates, which a well-drafted plan can do with date ranges. Our guide to wash sale rules and UK bed and breakfasting covers the full interaction, including why the common British bed-and-ISA tactic destroys the US loss. In short, a 10b5-1 trading plan that is silent on vesting dates will eventually produce a mismatch.
Special Situations for Americans in Britain
New Arrivals and the Four-Year FIG Regime
Since 6 April 2025, a person arriving in the UK after ten consecutive years of non-residence can claim the four-year foreign income and gains regime. Gains on shares in a US company are foreign gains, so plan sales in a claim year can be free of UK tax. That sounds ideal, but the US side changes too. With no UK tax paid, the gain fails the 10% test and becomes US source, so the full 20% plus 3.8% is payable to the IRS. That is still far cheaper than 24% UK tax followed by a partial credit, so a newly arrived executive should usually front-load a 10b5-1 trading plan into the FIG years. A claim year also forfeits the personal allowance and the £3,000 annual exempt amount, which must be weighed against the size of the sales.
Leaving Britain and Temporary Non-Residence
An executive who leaves the UK and continues selling under a 10b5-1 trading plan abroad is not necessarily outside UK tax. Under the temporary non-residence rule in section 10A of the Taxation of Chargeable Gains Act 1992, gains on assets held before departure that are realised during a period of non-residence of five years or less are taxed in the year of return. A plan that sells heavily in the first years abroad and is followed by a return to London can therefore recreate the UK charge, sometimes at a moment when the matching US credit has already expired.
Treaty Position and the Saving Clause
The US-UK income tax treaty gives the UK the right to tax gains of its residents on shares, while the saving clause preserves full US taxation of US citizens. Relief therefore comes through the foreign tax credit rather than through exemption, which is why the sourcing and timing rules above decide the outcome. Our tax treaty optimisation service reviews the treaty position alongside the plan schedule.
Reporting the Brokerage Account
Shares held with a US broker are not in a foreign financial account, so they do not appear on the FBAR or on Form 8938. However, sale proceeds swept to a UK bank account or a UK investment platform do, once the aggregate balance passes the thresholds set by FinCEN's FBAR rules. Missed reporting of a London account that received plan proceeds is one of the most common gaps we see, and our FBAR and FATCA reporting team fixes it routinely.
Case Study: A Nasdaq Executive in London Redesigns a 10b5-1 Trading Plan
The Facts
Consider Michael, a US citizen and senior vice president of a Nasdaq-listed software company, who has lived and worked in London since 2018. He is a UK additional-rate taxpayer and holds 40,000 vested shares from years of RSU awards. His UK section 104 pool has an average base cost of £70 per share, and his US lots have an average basis of $92 per share, all held for more than a year. His general counsel asks him to adopt a 10b5-1 trading plan to sell 10,000 shares over the next year, and the broker's draft spreads the sales evenly from September 2026 to August 2027.
The Numbers on One Tranche
Assume the shares sell at $180 and sterling trades at $1.33. Ten thousand shares raise $1,800,000, or £1,353,383. The UK gain is £653,383 against a pool cost of £700,000, and after the £3,000 annual exempt amount the UK tax at 24% is £156,092, about $207,602. The US gain is $880,000 against a basis of $920,000. US regular tax at 20% is $176,000, and the net investment income tax adds $33,440. The UK tax is 23.6% of the dollar gain, so the 10% test passes and the gain is foreign source. On a properly timed return, the UK credit wipes out the full $176,000 of US regular tax, leaving $31,602 of excess credit to carry forward and the $33,440 of net investment income tax as the only US cost.
What the Broker's Draft Would Have Cost
Under the broker's schedule, the September to December 2026 sales fall in US 2026, while their UK tax is paid on 31 January 2028. The sales from mid-April to August 2027 have the same problem one year later, because their UK tax is paid on 31 January 2029. Michael files on the cash basis, so only the sales between January and 5 April 2027, roughly a quarter of the plan, line up. On the other three quarters, about $132,000 of US regular tax, the credit arrives two years after the gain and cannot be carried back far enough. Unless he has other foreign passive income in those later years to absorb it, that $132,000 is paid twice, once to each country.
The Redesigned Plan
Michael's 10b5-1 trading plan was redrafted before adoption. Sales now run from 2 February to 3 April 2027 under price limits, with a smaller second window in January to March 2028, and the lot instruction names long-held lots only. In addition, he made the accrual election on his 2026 return, so any spill-over tranche can still be carried back. Each tranche now lands in the same US year as the UK tax that relates to it. The only residual US cost is the net investment income tax, and that is now planned for in his estimated payments rather than discovered in June.
How TaxYork Can Help
TaxYork prepares the US and UK returns for American executives, founders and investment bankers in Britain who sell US-listed stock. Before a 10b5-1 trading plan is adopted, we map the proposed schedule onto both tax calendars, test the 10% sourcing threshold on each lot, and recommend dates and lot instructions that your counsel and broker can write into the plan. After the sales, we reconcile the broker's dollar records with the UK share-matching rules, prepare Form 1116 with the correct timing, and file the UK Self Assessment so both returns agree. Where earlier years were filed without these adjustments, we prepare the amended returns and any missed reporting needed to recover stranded credits.
Conclusion
A 10b5-1 trading plan protects an insider from securities liability, but it also hard-codes the timing of large taxable sales months in advance. For an American in London, that timing decides whether the UK tax becomes a usable US credit or a second bill. The January-to-April window, the accrual election, long-term lot selection and awareness of vesting dates turn the same plan from a double-tax risk into a clean one. Build the tax calendar into the plan before the cooling-off period starts, because any later change to dates or amounts resets the clock.
Contact Us
If you are about to adopt or renew a plan, or you have already sold shares and suspect the credit did not line up, book a consultation with our US-UK team. Email hello@taxyork.com or call 020 3488 8606.
Written by the TaxYork Expert Team — US-UK tax specialists.
Disclaimer
This article provides general information only and does not constitute tax, legal or securities guidance for your circumstances. Tax rules, thresholds and exchange rates change, and their application depends on your own facts, your company's insider trading policy and the precise terms of your plan. The case study is illustrative and uses assumed share prices and exchange rates. You should obtain professional help from a qualified US-UK tax specialist and from securities counsel before adopting or modifying a plan. TaxYork accepts no liability for actions taken in reliance on this article.