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Most employee shareholders will be unaffected by PBR changes, says Mercer

Most employees acquiring shares in their companies through save as you earn option plans will not be affected by the Government’s capital gains tax changes, says Mercer.

The consultancy says reports suggesting up to 1.7 million workers could face an 80 per cent tax rise are wide of the mark and most people will not be affected with some actually be better off.

Mercer principal Mike Landon says for most employees the capital gain they make is covered by the annual CGT exemption, which is £9,200 for the 2007/2008 tax year and not affected by the proposed changes.

He says: “Even those employees who do make capital gains from SAYE plans which exceed the annual exemption quite frequently sell the shares immediately after they have acquired them. So they do not qualify for taper relief in any case. From next April, these employees will be paying CGT at 18 percent, instead of the 40 per cent currently paid by a higher rate taxpayer, and the 20 percent paid by a basic rate taxpayer. They will be better off under the new rules.”

“The tax-advantaged employee share plans – such as SAYE plans, share incentive plans, company share option plans and enterprise management incentives – will continue to be more attractive than unapproved share plans.

“They will allow employees to benefit from owning shares in their employing companies either completely free of tax or paying a capital gains tax rate of 18 percent, rather than having to pay income tax and national insurance contributions on the value of their shares.”

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