With the cost-of-living squeeze at the forefront of the minds of households and businesses, Chancellor Rishi Sunak used his Spring Statement to steady the economic ship being battered by waves of soaring inflation, petrol and energy bills, rising interest rates, tax increases and global financial uncertainty. Resilience and security were the key pillars of the Chancellor’s speech.
The Office for National Statistics says inflation rose to a 30-year high of 6.2% in February. And the price of goods leaving UK factories has also been rising substantially and is now at its highest rate for 14 years,
This reduces the Chancellor’s room to manoeuvre as higher interest rates increase government debt interest repayments to a projected £83bn this year and puts extra pressure on public finances.
Businesses and individuals are already braced for the 1.25% tax hike in National Insurance Contributions (NICs) and dividends tax from April, the freezing of tax allowances, and the planned rise in corporation tax. Despite many calls for him to delay the NIC increase, the Chancellor is standing by it.
However, to soften the blow for those most affected, he announced a small, 12-month cut in fuel duty and a substantial rise in the threshold at which employees start paying NICs, along with an increase in the Employment Allowance to help employers.
He has also promised to cut 1p off income tax by 2024.
Sunak is keen to provide incentives to industry to invest more as part of a new culture of enterprise, including tax relief for innovation and training. He is reviewing the Apprenticeship Levy and making the R&D tax relief regime more generous. More details to follow on how this will be done.
We can expect to see more substantial measures in the Autumn Budget.
The question is, can the economy wait that long?
Register here to join us at the OEC tomorrow morning at 8am to hear Chris Humphreys’ thoughts on the answer to this question and where the economy may be heading along with more details about todays announcements
Spring Statement 2022 new key measures announced:
- From 6pm tonight, fuel duty cut by 5p per litre until March 2023 (the biggest cut ever)
- For the next five years, homeowners having energy saving materials like solar panels, heat pumps, or insulation installed will pay zero VAT
- Doubling of the Household Support Fund to £1bn. This will allow Local Authorities to help those in need in their local areas.
- A recommitment to cutting taxes by the end of this Parliament
- Increase the NIC threshold from July 2022 by £3,000 to help the low paid. From July, people will be able to earn £12,570 a year without paying any income tax or National Insurance.
- A review of the Apprenticeship Levy to improve its effectiveness
- A cut in taxes for businesses promised in the Autumn Budget
- R&D tax relief to be made more generous – From April 2023, business will be able to claim relief on the storage of their vital data and pure maths research
- Employment Allowance increases to £5,000 in April 2022
- By 2024 a promise to cut Income Tax from 20% to 19%
Brief recap – key changes previously announced:
- 1.25% tax rise on dividends and NICs from April 2022
- Personal tax thresholds, CGT IHT etc. limits all frozen until 2026
- From April 2023 – Corporation Tax rate rises to 25%
- Super Deduction in place until April 2023
- Basis period reform for unincorporated businesses from April 2024
- Reduced rate of VAT for the hospitality sector
- Plastic Packaging tax begins on 1 April 2022
- Residential Property Developer Tax from April 2022
- Making Tax Digital for Income Tax delayed until April 2024
