This year’s UK annual budget statement included a number of announcements that relate to employee share plans. While we expect the overall impact of these to be relatively small from a share plan administration perspective, there are a few points companies and share plan managers should be aware of.
- A reduction in capital gains tax
There is a welcome reduction in capital gains tax rates. The new rates will drop to 10% for basic rate tax-payers and 20% for higher rate tax-payers. It will be interesting to see how the wider gap between income tax rates and the new capital gains tax rates will influence the design of equity compensation in the future.
- Changes to Employee Shareholder Status
Since 2013, UK employers have had the opportunity to offer employees “Employee Shareholder Status”. This gives employees the opportunity to hold shares in the company free from capital gains tax, in return for signing away certain employment rights. The 2016 budget has introduced a new lifetime exemption limit of £100,000, which comes into force on 17 March 2016.
- Tax simplification for SAYE, CSOP and SIP
The budget papers confirmed that measures announced in December 2015 to simplify some of the arrangements relating to SAYE, CSOP and SIP will be included in the 2016 Finance Bill. For more information on these measures, please read our article on the 2016 UK Finance Bill.
Stuart Bailey, London-based Equatex Business Development Manager, commented: “Compared with some of the announcements the government has made in recent budgets and autumn statements, the impact on share plans is relatively small. The only big surprise was the lifetime limit on capital gains tax exemptions for those with Employee Shareholder Status”.
The complete information on the 2016 UK budget is available on the UK government’s website.