Tax rise threat to ‘save as you earn’ schemes

As I expected the Capital Gains Tax change announced in GordonsDarling's first budget will hit Share Option schemes , and yes I do have one!

This was supposed to simplify CGT and hit Private Equity Chiefs, however it looks like it will also hit, not only entrepreneurs and the like, but also savers who at the moment appear to be a dying breed as is normal when it looks like we are going into a recession.

As noted in the depths of the CSR (p146 apparently) the savings ratio in the UK is the lowest it has ever been as noted here.

So what has the Chancellor done he has changed the rules and now the 1.7m savers in share-save schemes will face increased CGT taxes up from 5% to 18% for basic rate Tax Payers and from 10% to 18% for Higher rate tax payers.

According to Labour they are trying to encourage Long Term savings and wider share ownership. Either they are lying about this or they are just incompetent. They just can't work out joined up government.

As normal with one of Gordon'sLabour's tax changes it is the poorest who are hit hardest.

According to ifs ProShare, whose members include many FTSE-100 companies, the CGT changes were ill considered and would hit some savers hard.

“While the Treasury may have sound reasons for simplifying CGT, it would appear the consequences for employees saving through employee share plans had not been fully assessed. These apparently unintended consequences contradict the government’s stated commitment to encouraging long-term saving and to its support for wider share ownership,” it said.

So another "hidden" tax from Gordon. As they said it's all in the Detail.

FT.com / In depth - Tax rise threat to ‘save as you earn’ schemes