The Esop Centre urged Chancellor Rishi Sunak not to punish employee shareholders in his March Budget by slashing the Capital Gains Tax (CGT) exemption allowance and raising charge bands towards Income Tax levels.

A letter, supported by many Centre practitioners (plan advisers), is now on the Chancellor’s desk, setting out why targeting CGT would be very damaging for employee share ownership plans, especially for SAYE Sharesave and discretionary schemes, like Enterprise Management Incentive (EMI) and Growth Shares. 

Many share scheme practitioners and share plan user companies are concerned about recent proposals within a Treasury commissioned review regarding CGT. Our primary concern is the suggested scale of the reduction (from the current GBP 12,300 p.a. to between GBP 2,000 and 4,000 p.a.) in the annual CGT exemption allowance. Almost all tax-advantaged employee share scheme participants have no other source of capital gain and in large part (98 percent of SAYE-Sharesave employee participants), their gains fall within the current exemption. To alter that landscape would be very worrying.

Most Sharesave participants, including many supermarket check-out staff and factory workers, have no other savings vehicles, other than the biscuit tin on the mantelpiece. Their SAYE scheme gains on vesting are their rainy-day savings, enabling them to buy new furniture, take a holiday, or pay for a sudden disaster. They are not sophisticated private investors who can park their gains in ISAs, or other tax efficient vehicles.

For years, cross-party support in the UK and elsewhere for tax-advantaged employee participation in enterprise success has held solid, justly so, in part to encourage enterprise and the engagement of millions of employees in democratic wealth creation. Employee share ownership is intended to help ease the natural economic tendency of un-trammelled capital forces toward increasing income and wealth disparities.

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