BUDGET REPORT

9 MARCH 1999

INCOME TAX AND PERSONAL SAVINGS

A NEW ALL-EMPLOYEE SHARE SCHEME

With the aim of promoting long-term share ownership, a new all-employee share scheme is to be introduced in the 2000 Finance Bill. The main features of the scheme will include:

·     greater flexibility for employers in the ways shares can be given to employees, including matching the shares purchased by employees;

·     employees will be able to purchase shares in their company from their pre-tax salary as well as receiving free shares;

·     shares given to employees will be income tax free if held in the scheme for three years;

shares bought by employees and held in the scheme for three years will normally be subject to income tax on the amount of salary used to buy them;

·     the longer the shares are held in the scheme, the lower the proportion of salary used to buy the shares that will be charged to income tax;

·     dividends paid on the shares whilst they are in the scheme will be tax free, provided they are used to acquire additional shares;

·     if the shares are held for three years any gains arising on the shares whilst they are in the scheme will be tax free;

·     tax benefits and payroll savings will be provided to encourage employers to establish a scheme;

MOBILE TELEPHONES

The tax charge for employees provided by their employer with a mobile telephone is abolished with effect from 6 April 1999.

PENSIONS

The Chancellor proposes to increase the earnings cap for occupational and personal pension schemes from £87,000 to £90,600 with effect from 6 April 1999.

SETTLEMENTS AND TRUSTS FOR CHILDREN

In order to promote fairness the existing anti-avoidance legislation is being strengthened to prevent parents avoiding tax by transferring their assets to their minor children. The Government was particularly concerned about the use of savings schemes which incorporated bare trusts and enabled income to be withdrawn from the trust without triggering a tax charge. With effect from 9 March 1999 income arising will be taxed as that of the parent, subject to a £100 de minimis.

ENTERPRISE MANAGEMENT HEADING

The new enterprise management incentive will allow the award of equity worth up to £100,000 for success in building up the new path-breaking companies our economy needs. Details will be published 10 March 1999.