Tax breaks are set to be introduced which could revolutionise share ownership in the UK.

The government has announced plans to make it much cheaper for employees to buy shares in their own companies.

Workers will be able to buy shares in their firms out of their pre-tax salary, as well as receiving free shares.

Employers will also be able to match the shares bought by employees in order to give them a greater incentive to improve the performance of the company.

Tax free

Workers will not have to pay any capital gains tax on the shares they buy if they hold them for three years.

Any gains they make on the shares will escape tax.

However, employees will have to pay income tax on the purchase price of the shares when they are sold - so in effect the tax is merely deferred.

The move is part of an initiative by the chancellor to double the number of employees that own shares in their own company.

The aim is to allow workers to benefit directly from the performance of the company they work for.

Raising productivity

Lord Marshall, British Airways' Chairman, said: "When employees are able to own shares in their companies, they are clearly more interested in the way the business works and are more committed to its long-term success."

Bill Callaghan, chief economist of the Trades Union Congress, said: "The Chancellor's shares-for-all plan is an important step forward. Employee involvement is a key ingredient in improving the performance of companies."

At present just over 2 million people and 2,000 companies take part in share saving schemes.

Your Views - Have your say on the Budget