Spring Budget – what do the changes mean for individuals?
In the Spring Statement today, Rishi Sunak announced some welcome changes aimed at addressing soaring inflation, the increase in petrol and energy bills, rising interest rates, tax increases and global financial uncertainty.
National Insurance Contributions (NIC)
For employees and the self-employed, NIC is currently payable when income reaches a certain level – £9,570 for employees. This is different to the starting point for income tax which is currently £12,570. The plan has been to align these over time, but in today’s announcement, this alignment is being accelerated so that from 6 July 2022, the starting point for NIC will increase to £12,570. This means a saving of around £300 per year for employees. The delay until July is to give payroll providers and employers the opportunity to get their software and systems in order to implement the change.
The increase in the threshold also applies to the Class 4 National Insurance rates for the self-employed, meaning that the Lower Profits Limit will rise on 6 April 2022 to £9,880 and then rise once more on 6 July 2022 to £12,570 to align itself with the Class 1 National Insurance rates for employees. Up to now, Class 2 National Insurance has been due once profits exceed the Small Profits Threshold (£6,725 for 2022/23), payable at a weekly rate and once your profits exceed the Lower Profits Limit, you are liable to Class 4 National Insurance on the profits exceeding the limit in addition to the Class 2 payments.
The Spring Statement has also seen the reduction of the Class 2 liability to nil on self-employment profits between the Small Profits Threshold and the Lower Profits Limit meaning that no NIC will be payable until profits reach £12,570 (from April 2022) but the income will still count towards National Insurance Credits, which give access to certain state benefits and state pension.
From 6pm yesterday, fuel duty has been cut by 5 pence per litre.
The Government has also issued the following to help households deal with the rise in energy bills:
- £25 extra per week for poorer households when the temperature is Zero or below.
- Expanding the scope of VAT relief for energy saving materials (e.g. Thermal Insulation or Solar Panel) so that there is 0% VAT on them for the next five years.
In his closing remarks, the Chancellor set out his plan to reduce the basic rate of income tax from 20% to 19% by 2024. More detail on this is yet to come but the Government has confirmed that, despite the cut, the tax relief on gift aid for charitable donations will remain at 20% until 2027, with a three year transitional period.