UK Chancellor Weighs Tax Hike on Family Business Share Schemes

LONDON, Oct 19 (OPA) — Chancellor John Healey is reportedly evaluating a policy shift that would treat proceeds from 'redeemable shares' as income, subjecting them to a top rate of 45 percent. Currently, these transactions are taxed as capital gains at 24 percent for higher-rate earners. The proposed change would significantly increase the tax liability for business owners looking to retire and transfer ownership to successors.

Under the current system, an entrepreneur selling a £1 million firm faces a £240,000 tax bill. If reclassified as income, that same transaction would incur a £450,000 charge. While the Treasury has declined to comment ahead of the October 28 Budget, the proposal follows a June consultation launched by HMRC regarding the tax treatment of share buybacks.

This potential policy follows recent government friction regarding inheritance tax reliefs for family firms. Farmers previously campaigned against levies on assets exceeding £1 million, eventually securing an increase in the threshold to £2.5 million. Business groups, including KPMG, have expressed concern that these cumulative tax pressures could stifle investment and long-term planning for small and medium-sized enterprises.

Shadow Chancellor Andrew Griffith criticized the reported plans, describing them as a punitive measure against risk-takers and job creators. The government faces mounting pressure from the business community, which has already voiced opposition to recent increases in national insurance contributions, minimum wage hikes, and expanded workers' rights regulations. The Treasury remains under scrutiny as it balances fiscal targets with the need to maintain economic growth.