This year's Spring Statement has had more people taking notice due to the need for the Chancellor to step in and help a nation struggling with rampant inflation with cost increases from food to energy to fuel. Coupled with expected tax rises at the previously announced Budget, Sunak was expected to deliver a support package - and he provided two lifeline plans.
Beginning with three measures to ease the cost of living crisis he announced:
- A cut to fuel duty by 5 pence per litre, so from the current 57.95 pence to 52.95 pence per litre.
- A five year zero rating on VAT for expenditure of home energy efficiency improvement costs such as heat pumps, solar, insulation and more.
- A doubling of the household support fund for local councils to £1 billion - starting from next month.
The next move had more of an impact. A commitment to a tax plan to start cutting taxes from the next tax year. This included:
- Health and Social care levy will be staying (1.25% deduction ring-fenced for NHS).
- National insurance primary threshold (and lower profits limit for the self employed) is being raised to £12,570 from July 2022. Aligning the tax-free threshold and NIC threshold for the first time. The lower profits limit for the self employed however is being raised to £11,908 in April 2022 - and then the full £12,570 from April 2023.
- Self employed people no longer have to pay Class 2 NIC's if profits are below the new small profit threshold of £12,570 from April 2023. However, the threshold is being raised to £11,908 from April 2022.
- Income tax basic rate to be cut to 19 percent from 2024. It is currently 20 percent. It is not known whether devolved regions will follow suit.
- Employment allowance (a discount from an employers total NIC bill) to be raised from £1,000 to £5,000.
- A number of cuts to business rates and announcement of tax cuts for business investments from Autumn.
We have updated our calculators and tools for 2022. The NIC changes reflected will be based on applying the £9,880 NIC primary threshold from April 2022 and then switching to the £12,570 NIC primary threshold from July 2022. Effectively a quarter of tax year 2022 uses the previously announced £9880 NIC primary threshold.