Employment Related Securities Bulletin 58 (November 2024)
Find out about how recent changes announced have an impact on Employment Related Securities and what this means for you.
Private Intermittent Securities and Capital Exchange System (PISCES)
Earlier this year, the previous government published a consultation about the government’s proposal for the Private Intermittent Securities and Capital Exchange System (PISCES).
This is a new type of regulated trading platform that allows for the intermittent trading of private company shares on a multilateral system. The consultation response has now been published, alongside draft legislation to show how the Treasury intends to set up the PISCES regulatory regime.
As set out in the consultation response, several respondents asked for clarity on how tax-advantaged employee shares schemes, such as Enterprise Management Incentives (EMI), would interact with PISCES. The government is considering this feedback further and will provide greater clarity in due course. As part of this, the government would welcome further engagement with stakeholders on the interaction between PISCES and EMI. Interested stakeholders can contact the Treasury’s PISCES team at: PISCES@hmtreasury.gov.uk
Non-domicile reform
From 6 April 2025, the remittance basis of taxation will be replaced by a new tax regime based on tax residence. The concept of domicile as a relevant connecting factor in the UK tax system will be removed.
For more information read the Tax changes for non-UK domiciled individuals policy paper and technical note Reforming the taxation of non-UK domiciled individuals, published on the day of the Autumn Budget 2024.
Overseas Workday Relief (OWR) is an income tax relief available to UK resident non-UK domiciled employees on employment income paid and kept offshore and related to days spent working abroad as part of their UK employment.
From 6 April 2025, as part of the non-domicile reform, eligibility for OWR will be based on an employee’s residence and not their domicile. Where an employee is eligible for the new Foreign Income and Gains (FIG) regime in a tax year, they can make an OWR election which will allow them to make a claim for relief. OWR will continue to apply to certain types of employment income, including Employment Related Securities (ERS) income.
From 6 April 2025, for all ERS and ERS options, the calculation of Foreign Securities Income will be modified for any part of the relevant period that falls after this date, regardless of the date the security or option was granted.
Where the income is apportioned to a tax year in which an employee is eligible for new OWR ‘a qualifying year’, this income will no longer be treated as Foreign Securities Income and instead will be treated as ‘Securities Income’. The employee may then be able to obtain relief on this income, which relates to duties performed outside the UK in a qualifying year, separately through OWR.
The calculation of Foreign Securities Income for any part of the relevant period before 6 April 2025 is unchanged, with the remittance basis rules continuing to apply.
The non-tax advantaged share scheme ‘Other’ return contains questions on each tab which references apportionment for residence or duties outside of the UK. The questions on the return template will not change but the guidance note for these questions will be updated for 6 April 2025.
Neonatal Care (Leave and Pay) Act 2023
Neonatal care leave and pay is being introduced to provide up to 12 weeks of paid leave and pay for parents of babies who require neonatal care. It is available if a baby has received medical or palliative neonatal care for at least seven consecutive days within the first 28 days after birth.
Employers will now be required to add ‘statutory neonatal care pay’ to the list of statutory benefits or payments in the notice that employers must provide employees when entering a Share Incentive Plan (SIP).
This notice informs employees of the effect that deductions from salary for the purchase of SIP partnership shares, may have on entitlement to statutory benefits/payments. This only applies to new contracts issued from 6 April 2025.
Carried Interest taxation reform
The government announced at Autumn Budget 2024 that it will reform the way carried interest is taxed.
From April 2026, all carried interest will be taxed within the income tax framework, with a 72.5% multiplier applied to qualifying carried interest that is brought within charge.
As an interim step, the two capital gains tax rates for carried interest will both increase to 32% from 6 April 2025. The government will also consult on introducing further conditions of access into the regime.
More details are set out in the summary of responses and next steps document. This includes details of how to participate in the consultation which runs until 31 January 2025.
Capital Gains Tax — tax rates and other changes
There were four measures announced at Autumn Budget 2024 which all relate directly to Capital Gains Tax (CGT). Read the following policy papers published on the day of the Autumn Budget 2024 for more information:
- Changes to the CGT rates
- Investors’ Relief – reduction in the lifetime limit
- Alternative finance – tax rules for refinancing
- Capital Gains on liquidation of a Limited Liability Partnership
Of these four measures, the most relevant to Employment Related Securities (ERS) is the changes to the CGT rates. In particular, the lower and higher main rates of CGT will increase to 18% and 24% respectively for disposals made on or after 30 October 2024.
If shares acquired through a share scheme, whether a tax-advantaged scheme or other scheme, are sold or disposed of, CGT may need to be paid. Find out how to work out whether the gains are above the tax-free allowance, known as the CGT annual exempt amount (AEA). Only gains above this threshold are subject to CGT.
Find out more information about tax when you sell shares.
With the change to Capital Gains Tax (CGT) rates, individuals will now need to pay CGT on the amount of their gain above the AEA for disposals made on or after 30 October 2024 at a rate of:
- 18% for any gains that fall within their unused basic rate band
- 24% if they are a higher- or additional-rate taxpayer
Individuals must report capital gains on their Self-Assessment tax return and pay any CGT by 31 January following the end of the tax year in which the gain was made.
As the rate change is happening in-year, HMRC will provide guidance and tools to support customers to calculate and report the CGT that is due. If an individual is not already in the Self-Assessment system, they will still need to notify HMRC of the gain.
Find out more information about how to report and pay Capital Gains Tax.