Spring Statement 2022
On the 23rd March 2022, Rishi Sunak unveiled his Spring Statement. Despite the sun shining in the UK, there seems to be a darkness surrounding increasing prices, particularly for food and energy, with inflation announced this morning at 6.2%. The disastrous war in Ukraine is also adding to price increases and it is feared that increase in salaries will not align with the cost of living.
From the October 2021 budget, we were already aware of some key changes being brought into effect from 1st April 2022 including the National Insurance and Dividend Tax rate increasing by 1.25%.
So, what did today’s Spring Statement bring for both individuals and businesses? Below we have summarised the key announcements:
Individuals:
Cost of Living:
Fuel duty: Temporary 12 month cut to duty on petrol and diesel by 5p per litre taking effect from 6pm today (23rd March 2022).
Energy efficiency improvements: VAT relief available for the installation of energy saving materials (ESMs) will be extended and all such items will now have 0% VAT for the next 5 years (not immediately available in Northern Ireland).
Income Tax and National Insurance Contributions (NIC):
Class 1 NIC for employees: The National Insurance Primary Threshold for employed earners will increase from £9,880 in April 2022 to £12,570 from July 2022 meaning only employees who earn over £12,570 per annum will be required to pay Class 1 National Insurance.
Class 4 NIC for self-employed: The Lower Profits Limit for self-employed earners will increase from £9,568 currently, to £9,880 from April 2022 and then £12,570 from July 2022. This means from July 2022, self-employed earners whose profits do not exceed £12,570 will not be required to pay Class 4 National Insurance.
Class 2 NIC for self-employed: Self-employed individuals with profits between the Small Profits Threshold (£6,725 from April 2022), and Lower Profits Limit (£9,880 from April 2022 and £12,570 from July 2022) will not be required to pay Class 2 NICs. This means from July 2022, self-employed earners whose profits do not exceed £12,570 will not be required to pay Class 2 National Insurance contributions.
Income Tax: From April 2024, the basic rate of Income Tax will be cut from 20% to 19% except for non-savings income for Scottish taxpayers. A three-year transition period for Gift Aid relief will apply, to maintain the income tax basic rate relief at 20% until April 2027.
Antigen Test: There will be a one-year extension to 2022/23 for the exemption of employer-reimbursed coronavirus antigen tests on Income Tax and National Insurance.
Businesses:
Business Rates: The business rates multiplier will be frozen in 2022-2023. Eligible retail, hospitality and leisure business will also benefit from a new temporary 50% Business Rates Relief from April 2022.
Green relief for Business rates: Introduction of a targeted business rate exemptions from 1 April 2023 to 31 March 2035 for eligible plant and machinery used in onsite renewable energy generation and storage. A 100% relief for eligible low carbon heat networks with their own rates bill to support the decarbonisation of non-domestic buildings has been brought forward to take effect from April 2022.
Annual Investment Allowance: £1 million allowance extended to 31 March 2023 to support capital expenditure and investment.
Help to Grow Digital: The government will continue to help firms to adopt new digital technologies by offering eligible SMEs a 50% discount on approved software worth up to £5,000.
Employment allowance: From April 2022, the employment allowance will increase to £5,000 a tax cut worth up to £1,000 per employer.
R&D Tax reform: From April 2023, all cloud computing costs associated with R&D, including storage, will qualify for relief.
During the summer of 2022 the government is considering reforms to best support future business investment. With the super deduction due to end in 2023 several alternative regimes will be looked at to best support economic growth and ensure the UK remains a competitive place to invest. These could include increasing the Annual Investment Allowance and increasing Writing Down Allowances.
As always, our team are here to answer any questions you may have. Please do get in contact today.
