Spring Statement | Review of CSOP announced, NICs changes and health and social care levy
Published on 4th May 2022
The government announced in the Spring Statement 2022 that it is to review whether the Company Share Option Plan should be reformed and expanded, and announced increases in the NICs threshold from July 2022.
Tax-advantaged plans
The government has been conducting a review of the Enterprise Management Incentive (EMI) scheme, and an update was provided at the Spring Statement.
The chancellor confirmed that the current EMI scheme remains effective and appropriately targeted. He announced that the scope of the review is to be expanded to consider if the tax-advantaged Company Share Option Plan (CSOP) should be reformed to support companies as they grow beyond qualification for EMI. The reform would enable more companies to qualify to grant CSOP options. There is anticipation that there will be a significant increase in the individual limit for CSOP (currently £30,000), which has remained unchanged for many years.
NICs changes and health and social care levy
The 1.25 percentage point temporary rise in both employer's and employee's National Insurance contributions (NICs) went ahead as planned in April 2022. Many employers will now be including the message requested by HMRC on payslips to explain that this is linked to the introduction of the new health and social care levy.
To ease the impact of the NICs rise, the chancellor announced in his Spring Statement that the National Insurance Primary Threshold would be increased from £9,880 to £12,570 from July 2022. This is intended to allow payroll providers and employers some time to update their systems to reflect the change in the threshold and will align it with the income tax personal allowance. Read more on the UK government's tax plan here.
From April 2023, the 1.25% levy will be formally separated out to become a separate tax on earned income and NICs rates will return to 2021/22 tax year levels.
Impact on employee share plans
HMRC has indicated that it will be possible for employers to transfer the levy to employees holding employment-related securities such as options (in the same circumstances and way in which employer's NICs may be transferred).
There are some outstanding issues, including whether an existing election agreement to transfer employer's NICs would also cover the levy in the future. It is expected that HMRC will provide detailed guidance in the coming months. Companies operating employee share plans should review and update their plan documentation to refer to the levy prior to its formal introduction in April 2023.
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