Treasury confirms capital gains tax changes

The government has confirmed changes to capital gains tax so that all employees who own shares in their employer will have to pay 18% tax on any gain above £9,200 from April 2008.

This will affect staff who are participate in sharesave (also known as save-as-you-earn) schemes.

Fiona Downes, head of employee share ownership at IFS ProShare, said:”Having informed the chancellor of the fact more than 270,000 employees could be worse off following his proposals, we are naturally disappointed that this evidence appears to have been ignored.

“Employee shareholders will have to make relatively quick decisions about whether or not to sell or hold some of their shares. [Sharesave] participants should speak to their employer about the range of choices available to them or seek financial advice. Employers will also face a real challenge in communicating these implications to their employees within a very short period of time.”

The government has, however, announced a new tax relief for entrepreneurs, who own at least a 5% share of their company and have 5% voting rights whereby they will only pay 10% tax on the first £1m of capital gains. This will also apply to employees who meet this criteria, although this is only likely to be a small number of staff.