Capital gains tax (CGT) is to increase to 28% for higher-rate tax payers from midnight.
But in the first budget from the Conservative/Liberal Democrat coalition government, Chancellor George Osborne announced CGT will remain at 18% for low and middle-income earners.
The rise in CGT for higher-rate tax payers will mean affected employees who participate in employee share schemes will incur a higher rate of tax when they come to sell shares acquired through the scheme.
Matt Ellis, partner at Deloitte’s employer consulting business, said the change effectively restores the difference between income tax and CGT that was created when the rate of income tax increased to 50% for high earners.
“What the Chancellor has done is restore the same difference between the two rates, so putting it up to 28% means we are back to a 22% difference, and so you have got that parity restored,” he explained.
Julie Richardson, head of employee share ownership at Ifs Proshare, added: “Ifs Proshare is pleased the 18% capital gains tax rate remains unchanged for basic-rate taxpayers rather than increasing as many had feared. This is clearly good news for hundreds of thousands of basic-rate employees who save in their companies’ employee share plans.
“The rise to 28% for higher-rate taxpayers is obviously less welcome. The Chancellor previously said there would be “generous exemptions” for business assets and we were hopeful this would mean shares held in the company an employee works for were would fall into this category – as they had previously. We will continue to push for this policy tweak to help maintain the unique place employee share ownership holds in the UK economy.”†