The budget's impact on equity incentives: What companies and shareholders need to know

The budget brought the expected CGT and Employer’s NICs increases although not to the levels some had feared.

The combined effect of both changes means there is still a tax benefit for companies (and their employees) implementing equity-based incentive schemes rather than structuring via cash. CGT rates increasing with effect from today vindicates decisions to complete deals pre-budget but Increases to BADR rates with effect from April 2025 (and April 2026) still gives shareholders a reason to push through transactions in the next few months.

There are also long awaited changes to EBTs and EOTs - the latter being particularly impacted so that there needs to be a genuine change in ownership to the employees (ie the selling shareholders can’t retain control) and the trustee needs to be resident in the UK. I suspect sales to EOTs will remain popular though despite these increased restrictions, particularly with the increase in CGT rates, which effectively makes tax-free sales to EOTs even more attractive.