- 30 October 2024
As I'm sure many of you will have seen, Rachel Reeves delivered her first Budget today and there was no good news for all-employee share ownership.
The big headlines for our sector are two-fold: firstly, an increase in the rates of Capital Gains Tax (CGT) has been announced. Secondly, the government didn't announce its intention to reform employee share ownership plans, despite publishing its response to its consultation into the Taxation of Employee Ownership Trusts (EOTs) and Employee Benefit Trusts (EBTs) – which you can see here.
Reeves announced that CGT rates will increase from 10% to 18% for lower rate taxpayers and rise to 24% (up from 20%) for higher rate taxpayers. The CGT threshold is frozen at £3,000, albeit following significant drops in the tax free allowances in recent years - from £12,300 in 2022/23 down to the current rate of £3,000 in 2024/25.
When it comes to reforming ESO schemes the Treasury was silent. We've reviewed the Red Book (the in-depth detail of the Budget which is published immediately after the Chancellor finishes her speech) but the government has not announced any plans to introduce reform. This is despite our efforts to engage the new government in the months since the general election and, indeed, the years before. At the Labour Conference, I met with the Treasury's Exchequer Secretary James Murray MP (the minister with direct responsibility for ESO schemes) and impressed upon him the importance of acting quickly.
Whilst the absence of reform is disappointing, I am pleased to see that Labour MP Siobhain McDonagh - with whom we have been working in recent months - asked a Parliamentary Question to James Murray, who said in his reply (which you can read here) that the government is “considering” its response to the consultation and expresses gratitude to “those who took the time to respond". I take some hope from this that there is scope to engage on the issues.
ProShare will continue to lobby the new government and the new Parliament in support of share plan reform. We are in the process of meeting with the new intake of MPs, and we will be writing to new select committee members. We are also planning a Parliamentary drop-in session next month, a chance to introduce parliamentarians to employee share plans and explain why they must now be reformed.
The industry has united behind calls for change in recent months and I am heartened by the efforts of so many to support our calls on the Chancellor to consider reforms. While we had all hoped for better news today, our continued unity of purpose is still the most effective way to focus the Government’s attention in the coming months.
David Mortimer
Head of External Affairs