A quick overview of this year's Spring Statement and any upcoming changes.
Inflation rose to 6.2% in February, according to the Office of National Statistics, and people across the UK are watching their bills increase rapidly, especially with regard to energy costs, petrol prices, and the imminent National Insurance (NI) hike. The Office for Budget Responsibility says that households are facing the biggest drop in living standards since the 1950s, as disposable income levels fall.
The Chancellor of the Exchequer, Rishi Sunak, delivered his Spring Statement to Parliament on 23 March and it did contain a number of tax changes in light of the unprecedented global and UK political and economic circumstances.
National Insurance
The main tax measure announced was an increase in the primary threshold and lower profits threshold for NI to bring it in line with the personal allowance for income tax.
Employees
The primary threshold for Class 1 NI in 2022/23 has increased from £190 per week to £241 per week (up by £51).
With the rate of primary Class 1 NI set at 13.25%, this increase is worth £6.75 per week.
Changes will come into effect when the legislation has been passed (July at the earliest), to allow time for software providers to update payroll systems.
Employers
The employment allowance has increased from £4,000 to £5,000 for 2022/23.
These changes will particularly impact remuneration planning for small businesses and owner managed companies.
Self-employed
The lower profit limit for Class 4 NI for 2022/23 has increased from £9,880 to £12,570.
Class 4 NI will be charged at 10.25% in 2022/23, so this is a saving of £275 for a full year.
The saving will be prorated and the reduction effective from July.
Self-employed earners who earn over the small profits threshold, but less than the lower profits limits, will be credited with a contribution record, but will not need to pay Class 2 NI.
VAT
The VAT rate on energy savings materials will reduce from 5% to 0%.
Full details of qualifying products will be released later, but it will apply to a wider range of items and have simpler eligibility conditions.
Fuel duty
The rate of fuel duty will be reduced by 5 pence per litre with effect from 6pm on 23 March 2022.
Business rates
The implementation of the green reliefs has been brought forward one year to April 2022. Under these provisions the installation of certain green technologies does not increase the value of property for the purpose of assessing business rates (in England only).
Income Tax
The basic rate of Income Tax will reduce from 20% to 19% in 2024. Devolved administrations in Scotland and Wales must choose whether they follow suit.
Changes to capital allowances will be brought forward to incentivise investment in productivity and innovation from April 2023. These will be a replacement incentive when the super-deduction capital allowances end. The government will consult on proposals this year.
The government will also consult on possible changes to tax incentives for business investments, employee training, and improvements to research and development tax relief.
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