The 2022 Spring Statement summary
With inflation rates at over 6% on the day of the Spring Statement and expected to continue to rise to 9% by the end of 2022, many of us were eagerly watching to see what the Chancellor would do to help with the cost of living. He started by explaining that the cost of Covid and sanctions on Russia are not without cost and inevitably prevent the UK from recovering as quickly as it could.
Download our free PDF summary for a concise explanation on how UK taxes will change and could affect you:
Watch our live reaction and summary of the highlights that caught our attention:
5 Key tax updates that will affect you
- Fuel duty cut by 5p per litre from 6pm Wednesday 23rd March
Sunak started off with a crowd-pleaser by tackling motorists’ main concern of the exorbitant cost of fuel. Not only that, but the cut was put in place effective from 6pm yesterday so that drivers could benefit straight away. Whilst many are pleased with this measure, critics and environmentalists argue that it’s incompatible with the government’s plan to reach net-zero carbon emission by 2050 which was only announced 4 months prior. The reduction in fuel duty is in place for the next 12 months.
- Zero rate VAT for energy saving homes
Homeowners will no longer need to pay VAT when they invest to make their homes more energy efficient. The VAT cut will cover improvements such as insulation, solar panels, heat pumps and triple glazing. It will be available for the next 5 years. The Conservative government are particularly championing this tax cut claiming that it could not be put in place before because of EU law restrictions.
- National Insurance (NI) threshold rises in line with personal allowance
This was another welcomed decision whereby the NI threshold has increased to £12,570 from £9,500. It’s estimated that this will help over 30 million UK workers save over £330 and mean that over 2 million lowest paid employees will not have to pay any NI at all. This is due to come into force from 6 July 2022. However, the 1.25% NI increase that was announced in the Autumn Budget cannot be overlooked and is still due to be implemented from 6 April 2022 despite arguments that it should have been postponed until 2023.
- Employment Allowance increased to £5,000
Support for small businesses was not forgotten about in this Spring Statement. The Chancellor increased the existing Employment Allowance from £4,000 to £5,000 come April 2022. It means small businesses and charities with NI liabilities of less than £100,000 last year can benefit from an extra £1,000 in tax relief and will only have to start paying employers’ NI once the £5,000 has been used up.
- Personal income tax to be reduced in 2024
Sunak left the “best” to last in his 2022 Spring Statement, announcing that for the first time in 16 years, basic rate tax will be lowered. From April 2024 the basic rate will fall from 20% to 19%. Despite this seemingly generous proposal, critics were fast to react with comment such as questioning the justification of this whilst simultaneously raising NI rates. Even more cynical critics claimed that this comes as no surprise as this is how politicians buy their votes come election year.
Tax planning following the Spring Statement
If you’re interested in finding out how the tax changes will impact you and what strategies you can put in place to benefit as much as possible, please get in touch.