On 23 March 2022, Chancellor Rishi Sunak delivered his Spring Statement in Parliament, amid a cost of living crisis and higher public debt after the COVID-19 pandemic.
Bottlenecks in supply after the world economy comes back to life and rising energy costs have pushed up inflation, so the announcement that UK inflation had hit 6.2% in February overshadowed the Chancellor’s speech.
So, what were the most important announcements for businesses and individuals?
National Insurance thresholds
All eyes were on National Insurance contributions (NICs), with many hopeful that the 1.25% uplift to NICs and dividends would be scrapped.
However, Sunak said nothing about a reversal and the uplift has now come into effect. He did, however, announce that the threshold at which NICs are paid will be raised.
As such, the class 1 NICs threshold and lower profits limit for class 4 NICs will increase to £12,570 from 6 July 2022, bringing them in line with the personal allowance for income tax.
A significant statement in Sunak’s speech was the announcement that the Government intends to make the first cut to the basic rate of income tax in 16 years.
According to Sunak, income tax will be cut from 20% to 19% from April 2024, although there will be no changes to the higher (40%) and additional (45%) rates.
With fuel prices hitting record levels in early 2022, the Government stepped in to try to mitigate the effects by cutting fuel duty by 5p per litre.
The Treasury claims this represents a saving of £100 for the average car driver over the next 12 months, £200 for the average van driver and £1,500 for the average haulier.
The employment allowance, which allows eligible employers to reduce their NICs liability, will increase from £4,000 to £5,000 in 2022/23.
The Government said that increasing the allowance by £1,000 would take 50,000 businesses out of paying NICs on employment altogether.
Future business tax reform
With the super-deduction tax relief set to end in April 2023, the Chancellor said he plans to consult on future tax changes to encourage business investment.
The Government will also examine the ways in which the tax system, including the apprenticeship levy, can support employers as they invest in adult training.
What does the Spring Statement mean for businesses
Some of the measures announced in the Spring Statement appear to be promising for businesses, including a higher employment allowance and potential new incentives for investment,
But with ever-growing costs of doing business, many people were hoping for more direct support measures.
For instance, Fiona Graham, the external affairs and policy director at the Institute for Family Business, said the Statement was “a missed opportunity to support business in facing the huge challenges they are dealing with today”.
With that in mind, it’s important to plan effectively for your business, especially when you consider the UK now faces the largest tax burden since the Second World War.
As tax and financial excerpts, we can support your business and manage your tax liability to help you with any challenge you face. Contact us to find out more information.