Pre-Budget Report fillip for employee share schemes

Income tax and NIC increases announced on 24th November will heighten interest in tax efficient employee share schemes.

In his 2008 Pre-Budget Report the Chancellor announced an increase in income tax to 45 per cent. for those earning in excess of £150,000, a reduction in personal allowances for those paid more than £100,000 and a half point increase in both employer and employee NICs across the board. These will take effect from April 2011 (2010 for the change to personal allowances).

These changes will make it more attractive to provide employees at all levels - and especially senior executives - with benefits in the form of tax efficient employee share option and share ownership schemes such as the Enterprise Management Incentive, Company Share Option Plan and Share Incentive Plan.

Meanwhile the basic rates of income tax for employee benefit trusts are also set to rise, to 45 per cent. (37.5 per cent. dividend rate). Companies looking to warehouse shares for employee schemes will now have a further incentive to consider offshore arrangements.

Learn more about tax efficient employee share incentives and employee benefit trusts by downloading free factsheets here.

RM2 has just published the 2008/09 edition of "Employee Share Schemes - a Guide for Directors". You can order a free copy of the Guide here. Or if you are just looking for some informal, free advice, contact us on 0800 043 8150.