The Spring Statement 2022
Chancellor of the Exchequer, Rishi Sunak, announced the Spring Statement today. Whilst the Statement is usually only an economic update, the highest inflation in 30 years and a rising cost of living has put pressure on the government to provide more details, in the form of a ‘mini-Budget’.
“This statement puts billions back into the pockets of people across the UK and delivers the biggest net cut to personal taxes in over a quarter of a century,” said Sunak.
We’ve broken down what you need to know.
Response To The Cost of Living
In order to help people manage the ever rising cost of living, Sunak announced there will be several measures put in place to reduce costs which we have covered in this blog post.
They also announced there will be a tax plan published to ensure the government reduce taxes. This is available to read in full on the government website.
Income Tax
There will be a 1% cut to income tax in 2024, the first time they have reduced income tax in 16 years. This will be a total of £5 billion cut.
Some have criticised this cut to income taxes whilst simultaneously raising the National Insurance rate as it drives a further wedge between the taxation of unearned income and earned income, benefiting pensioners and those living off rents at the expense of workers.
National Insurance Threshold
The National Insurance threshold will be raised by £3,000, taking the threshold to £12,570. Sunak went on to explain this is the best way to help low and middle income workers.
However, the planned ‘Social Care Levy’ of a 1.25% increase will still be going ahead in April to raise money for the NHS.
Cutting Fuel Tax
In response to the sharp increase in fuel prices and following the fuel duty freeze announced in the Autumn Budget last year, Sunak announced there will be a reduction of 5p per litre to fuel tax. Unfortunately, due to the increase in VAT this is estimated to make little difference.
Abolishing VAT on Energy Saving Insulation
The 5% VAT rate on energy saving materials, heat pumps and solar panels will be cut to zero for the next 5 years. This change follows the cutting of red tape imposed by EU law.
Accompanying this, the government will reverse the EU’s decision to take wind and water turbines out of scope.
R&D Tax Relief
Acknowledging that R&D tax relief is not working as well as it should for small and medium-sized companies, the government will be reforming R&D tax credits so that they’re “effective and better value for money”. The spending review committed to a £39.8 billion R&D budget for 2022 – 2025.
A New Culture of Enterprise
Along-side the economic announcements, Sunak commented on the need to create a new ‘culture of enterprise’ with the private sector training, investing and innovating more.
The Autumn Budget
Sunak gave a few suggestions to what we’ll see in the coming Autumn Budget, including an R&D tax relief form, a tax rate cut and increasing employment allowance to £5,000.
You can read the full Spring Budget here.
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