Are ShareSave, Enterprise Management Incentive Schemes and Company Share Option Plans under threat from opposition parties?
I was a judge at the ProShare awards on Wednesday 4 December and many congratulations to the worthy winners of the awards fostering share ownership and other awards for excellence in promoting share schemes.
One element that has been very little commented on is the potential tax changes to Capital Gains Tax and its effect on tax advantaged share schemes.
At present, if you make a gain under a tax advantage plan it is subject to CGT (Capital Gains Tax) rather than Income Tax and National Insurance which gives a substantial advantage to the employee. Moreover, the employee making a gain of up to £12,000 in a tax year may not pay any tax.
Millions of employees from traditionally lower paid sectors such as retail, construction and service industries have benefited from these plans over the last 40 years. They have been enthusiastically supported across the political spectrum.
Both Labour and the Liberal Democrats are looking to align CGT and Income Tax rates. The Liberal Democrats are also looking to abolish the annual exemption for CGT. This would have a considerable effect on the millions of ordinary employees who benefit from these share plans. These plans are truly for the many– not the few. They have been introduced by parties of all different colours. It would be a shame if their use came a casualty of Income Tax and Capital Gains Tax alignment proposals.
Please note that these are the opinions of the author and not of ProShare.