The government has launched a consultation to gauge the effectiveness of its employee share schemes, Save as You Earn and the Share Incentive Plan.
The Treasury announced in the Spring Budget 2023 that it would raise a call for evidence into non-discretionary, tax-advantaged employee share schemes to look at whether they fulfil policy objectives, levels of participation and whether they incentivise share ownership for earners at all levels.
The results of the consultation, which is open to businesses until 25 August, could be used in a shake-up to current government-sponsored employee share schemes.
Currently, workers can buy discounted shares in their company by setting aside up to £500 per month for either three or five years, through the Save as You Earn Programme. Employers can offer a discount of up to 20% on the value of the shares, and any bonuses or interest earned is tax free.
The Share Incentive Plan allows companies to gift employees up to £3,600 of equity in their company, or to help employees with the cost of purchasing shares. Employees don’t pay tax or national insurance on the value of these shares if they hold them for five years.
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In a foreword to the consultation, Victoria Atkins, financial secretary to the Treasury, said these schemes were “a key policy for promoting employee ownership and creating a stronger link between production of capital and labour to help companies grow”.
“These schemes, and the generous tax treatment they offer, help to reward employees for their hard work and incentivise savings and investing habits amongst employees.”
However, participation in the schemes is relatively low, and the Treasury wants to increase awareness of the benefits as well as potentially simplify participation.
In 2020/21, just 260 companies participated in Save as You Earn schemes, compared with 290 in 2015/16. Share incentive plans were adopted by 480 companies in 2021, compared with 550 in 2015/16, according to figures from HM Revenue and Customs.
In November 2022, Labour MP Sir George Howarth launched a bill under the Ten Minute Rule that proposed updating the schemes and introducing a new, third scheme for low-paid workers.
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This would widen participation to workers outside of pay-as-you-earn arrangements and would be more accessible to gig-economy workers, he argued.
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