Today’s Spring Statement set out the Chancellor's tax plan as well as announcing some immediate changes to help individuals with the cost of living crisis. The Chancellor's tax plan will cover help for individuals, creating conditions for higher growth and sharing the proceeds of growth.
For businesses there was no surprise to see the Chancellor not announce new significant tax changes in the spring statement, as he has delayed many of these tax plan changes until the Autumn Budget. However, in this blog, we cover the key points of the spring statement 2022.
As predicted, the Chancellor announced a cut in fuel duty by 5p per liter. The cut takes effect from 6 p.m. tonight and will be extended until March 2023. This will no doubt help a lot of people facing a cost of living crisis and will also help business sectors that rely on transport and that attract high fuel costs.
A new temporary business rates relief of 50% on business rates for the retail, hospitality & leisure industry was announced which is great news for a sector still recovering from the pandemic, but there were no announcements about reviewing the wider business rates system, meaning that this help is only applicable to businesses in the retail, hospitality and leisure sectors for now.
National insurance contributions
With national insurance contributions set to rise with the introduction of the Health and Social Care Levy, rising costs and rising energy prices, households needed some good news today in the spring statement. So, the surprise announcement was a bigger than expected increase in NIC thresholds from July 2022.
The Chancellor has aligned the NIC threshold and income tax thresholds. The employee primary threshold and the self-employed lower profits limit will increase from £9,880 to £12,570 meaning people will be able to earn £12,570 without paying NIC or income tax. This change will offset the planned national insurance rise from the Health & Social Care levy coming into effect on 6 April 2022.
The Employment Allowance which allows eligible businesses to reduce their employer National Insurance contributions (NICs) bills each year is being increased from April to £5,000 giving some much needed help to small businesses.
For the self-employed, there was also a little bit of good news with the announcement that the self-employed with profits between £6,725 and £11,908 will not need to pay Class 2 NICs from April 2022. This won’t affect their ability to access entitlements to contributory benefits. This will equate to a saving of £165 per year, which isn’t a huge amount but will help in a small way for the self-employed community.
Annual Investment Allowance (AIA) & Super-deduction
The Chancellor did remind people in today’s spring statement that the temporary £1 million level of the Annual Investment Allowance has been extended to 31st March 2023 and the super-deduction will also end on 31st March 2023. However, he did acknowledge that once the super deduction ends next year, the UK’s tax treatment for capital investment will be less generous than other advanced economies. He has said that he will tackle this in the Autumn Budget.
Income tax reduction
Whilst there were no immediate changes to income tax from today’s spring statement, a potential income tax reduction from 20% to 19% was announced today that may come into effect in April 2024. However, it’s worth noting that the Chancellor did caveat this by saying this will be dependent on certain fiscal conditions being met.
Energy efficiency products
With rising energy bills and energy costs set to soar from April onwards, there was little good news for individuals facing these in the spring statement. However, the Chancellor announced in the spring statement a zero percent VAT rate on a wider range of energy efficient goods for homeowners. This zero rate will apply to products such as solar panels, heat pumps, insulation, water turbines, and wind turbines. But this is little consolation for people who can’t afford their energy bills and certainly won’t have the money to invest in new energy efficient technology!
This may be good news however for businesses in the energy efficiency market who may see a boost in sales from this initiative.
Tax reduction and reform future focus
There wasn’t really any major business tax news in today’s spring statement but the Chancellor used the spring statement to set out his future tax plan for reducing and reforming tax but there will be no announcements not until the Autumn Budget. The areas that are being looked at between now and the Autumn Budget are:
PEOPLE: UK companies currently only spend half the European average on training for employees and the Chancellor intends to rectify this with additional incentives for companies to invest in employee training.
IDEAS: R&D spending in the UK lacks behind the rest of the world, the Chancellor believes that the current R&D system isn’t working and has vowed to reform R&D tax credits. The Autumn Budget will look at R&D reform to extend areas covered such as data, cloud technology and pure maths.
CAPITAL: The Chancellor said he would be looking at measures to cut tax rates on business investment, but there was no other detail around how he’ll be doing this.
None of these measures have been fully announced in the spring statement today, all of them will be announced in the Autumn Budget.
The Chancellor announced in the spring statement today some additional measures for individuals and households that are struggling with the cost of living crisis, but he did little to help the majority of businesses.
As we expected, he has left any major business tax changes to the Autumn Budget and we’ll update you of those changes when they happen.
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