In a tax-raising Budget, it is striking that employee share ownership has been effectively ring-fenced, a clear recognition that well-designed employee equity participation delivers corporate performance, investment and long-term economic growth, to the benefit of both businesses and the Exchequer.
The government’s expansion of EMI (with higher eligibility thresholds, a larger £6m company limit, and an extension of the period during which an exercised option will qualify for relief, rather than an extension of the option’s life itself, together with the removal of the notification requirement) and the CSOP/EMI alignment for PISCES liquidity shows that investment in share incentives is understood to be growth-positive. EMI eligibility is being widened significantly, with the gross assets limit rising from £30m to £120m and the employee threshold increasing from 250 to 500 staff. These reforms will help scale-ups recruit and retain talent, channel equity into productivity and turn more companies into long-term success stories.
The government might continue in this vein to ignite broad-based, sustainable growth. Alongside the focus on high-growth firms, the Employee Share Ownership Centre believes it is time to boost wider employee participation. One simple, low-cost step would be a £15,000 annual CGT allowance for gains arising from any tax-favoured employee share plan. This would be inexpensive for the Exchequer, high value for employees, and simplify the message around the benefits of share ownership in a powerful way.
The direction is positive: EMI and CSOP are being sharpened as tools of national competitiveness. The next step is to ensure all employees, not just executives, benefit from the growth they help create.
The other major change was the halving of Capital Gains Tax relief on sales to Employee Ownership Trusts where owners previously enjoyed a full exemption. Effective immediately, 50 percent of the gain on disposal will now be chargeable, a change the Chancellor framed as necessary to curb the rapidly escalating cost of the relief.
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