On 23 March the Chancellor, Rishi Sunak, made his 2022 Spring Statement to Parliament. The statement is effectively a ‘mini-budget’ for the nation and includes various tax changes intended to help businesses and individuals face the rapidly rising cost of living in the UK. Read this blog to find out more about these key changes.
What does the Spring Statement mean for individuals?
Lower National Insurance thresholds
In July 2022 the income threshold over which employees must pay National Insurance (NI) contributions will rise from £9,568 to £12,570 per year. This means fewer people will have to pay NI altogether and it will reduce the proportion of income that others must pay NI on. The effect of this, however, is tempered by plans to increase the NI rate in April 2022 by 1.25%.
A reduction in fuel duties
The fuel duty on petrol and diesel (ie the tax charged to importers and producers of these fuels) was reduced by 5p per litre on 23 March 2022. This reduction in costs for fuel companies is intended to be passed on to consumers in the form of lower petrol prices at the pumps. The cut will last at least 1 year.
An income tax cut in 2024
In 2024, the basic rate for income tax will be reduced by 1p per pound. This means that workers earning between £12,571 and £50,270 of taxable income per year will only have to pay 19% of this income (over £12,570) in tax, as opposed to the current 20%. For people in this tax bracket, the reduction will mean they pay up to £37.70 less income tax per year.
A VAT reduction for energy saving materials
VAT will be reduced, from 5% to 0% for 5 years, for energy saving materials that people and businesses can use to reduce their energy bills by making their properties more energy efficient. Eligible materials include solar panels, heat pumps and roof insulation.
Additional funding for the Household Support Fund
£500 million additional funding was announced for the Household Support Fund, bringing the programme’s total funding to £1 billion. This fund helps families to obtain essential items during the winter. Help can be obtained through local councils.
What does the Spring Statement mean for small and medium sized businesses (SMEs)?
An increase in the Employment Allowance
The Employment Allowance is the maximum amount of National Insurance contributions that eligible small businesses can claim back from the Government each year. The allowance is currently £4,000 per year. It will increase to £5,000 per year at the start of the new tax year, 6 April 2022.
A reduction in fuel duties
The reduction in fuel duties (above) could help to reduce running costs for businesses that use lots of fuel. For instance, those who make lots of deliveries or whose workers must travel to multiple locations for work.
A VAT reduction for energy saving materials
This reduction (explained above) will also benefit businesses looking to reduce both their energy bills and their environmental impact. It could be particularly helpful for businesses looking for cost-effective ways to meet Corporate Social Responsibility (CSR) objectives or Environmental Policy promises.
Some of the changes announced in the Spring Statement affect small businesses and their employment practices. If you would like advice on any of the changes, you can Ask a lawyer.
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