Against a backdrop of global crisis and severe economic repercussions, Chancellor Rishi Sunak presented his Spring Statement on 23 March 2022.
While the Statement was originally expected to provide little more than an economic update, businesses and individuals across the UK were looking to the Chancellor to provide support and help combat supply chain issues and cost of living pressures.
We’ve summarised the key announcements you need to know about.
National Insurance thresholds increased
With the previously announced 1.25% uplift to the rates of National Insurance contributions (NICs) due to go ahead in April, all eyes were on this tax.
The Government did not reverse this increase. Instead, it was announced that the thresholds before which it is paid – the primary threshold for class 1 NICs and lower profits limit for class 4 NICs – will be raised.
Both will increase to £12,570 from 6 July 2022, bringing them in line with the personal allowance for income tax.
In the first cut to the basic rate of income tax in 16 years, the Chancellor announced that income tax will be cut from 20% to 19% from April 2024.
No changes were announced for the higher (40%) and additional (45%) rates.
With fuel prices at record levels, the Government announced a 5p cut to fuel duty across the UK, applying as of 6pm on 23 March.
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 says this will take 50,000 businesses out of paying NICs on employment altogether.
Future reform for business tax
With the current super-deduction relief set to end in April 2023, the Chancellor said he plans to consult on future tax changes to encourage investment.
Sunak also said he will 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 your business?
A few of the measures announced in the Spring Statement appear promising for businesses – a higher employment allowance and potential new incentives for investment will no doubt be welcome.
But as higher costs bite, many were hoping for more direct support measures.
Fiona Graham, external affairs and policy director at the Institute for Family Business (IFB), said the Statement was “a missed opportunity to support business in facing the huge challenges they are dealing with today”.
Although the Statement offered some tax cuts, its announcements taken together with changes previously announced by the Government mean the UK’s overall tax burden is set to rise to 36.3% of GDP by 2026/27, according to the Office for Budget Responsibility.
With that in mind, it’s all the more important to plan effectively for your business, assessing the risks ahead and managing your tax liability.
As tax and financial experts, we can support your business through these challenges with tailored, precise advice.
Contact us to find out more.