Spring Statement Highlights

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While the Chancellor’s two previous announcements were dominated by Covid-19 support measures, this year’s Spring Statement was very much focused on addressing the cost of living crisis and was not the mini budget that some had predicted.

Prior to Rishi Sunak addressing Parliament, it was announced that inflation in the UK has risen to 6.2% (a 30-year high) and that it is likely to average 7.4% for the rest of 2022.

Below is a summary of the main points and the impact of the changes introduced.

TAXATION

– The primary threshold for Class 1 national insurance contributions (NICs) will increase from £9,880 a year to £12,570 a year from 6 July 2022, bringing it in line with the frozen personal allowance
– For company directors, who are subject to special rules, the equivalent annual amount from July will be £11,908. From 2023/24, all employees will share the same £12,570 annual threshold. The maximum potential Class 1 employee NICs saving in 2022/23 is £269
– For the self-employed, the lower profits limit will increase from £9,880 to £11,908 in 2022/23, rising to £12,570 in 2023/24. Class 2 NICs will not be payable if profits are below these limits. The maximum potential Class 4 NICs saving in 2022/23 is £208
– From April 2024, the basic rate of income tax will be cut from 20% to 19% for taxpayers in England, Wales and Northern Ireland. This will be a tax saving of £175 for the average taxpayer
– The 1.25% social care levy, due to come into force on 6th April, will remain

FUEL, LIVING AND ENERGY COSTS

– Fuel duty was cut by 5p per litre from 6pm last night until March 2023 (taking £3.30 off the cost of filling a typical 55-litre family car)
– Local authorities will receive £500m for the Household Support Fund from April to help vulnerable households with rising living costs
– Households will now pay 0% VAT on energy-saving equipment such as solar panels and heat pumps

BUSINESSES

– The employment allowance (which gives relief to small business National Insurance payments) will increase to £5,000 (currently £4,000) from April 2022
– Improvements to the R&D tax reliefs were announced including support for data an, cloud computing costs, refocusing relief on R&D undertaken in the UK
– Tax rates on business investment will be reviewed in the Autumn Budget

As always, if you have questions, please contact your financial planner here.

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