The Chancellor Rishi Sunak took to the stage on 23rd March to give his Spring Statement. Over the years this has very much felt like a ‘mini budget’ and this one was no different.
With concern in the country over rising inflation and the cost of living, there were many people hopeful the Chancellor would act to ease the pain. Leaving the political arguments aside around what he could of done, this is what he did do!
For the self-employed and employed
Historically, the thresholds for National Insurance and income tax were different. So, you have always paid National Insurance contributions on a lower amount of income before you had to pay tax.
In the spring statement , the Chancellor announced that the two thresholds would now be matched. Both NI and tax will kick in at the current tax-free personal allowance threshold of £12,570 for the 22/23 tax year.
This is great news, as for most people you will save a 9-12% deduction on just over £3000 of income.
This change doesn’t happen until July 2022, as it requires a ton of work for payroll software providers to change the system to handle this!
A personal tax cut for all
Rishi announced that the rate of personal tax in the ‘basic rate’ (think under about £50k income a year) will drop from 20% to19%. This one won’t hit until 2024, but it’s a fairly unusual thing to see, as it hasn’t happened for around 16 years!
For businesses with a team
The ‘employers allowance’ that you get to use against the National Insurance bill generated by your team has increased from £4000 to £5000 a year. This is much-needed good news, as the new health and social care levy is increasing your team costs by 1.25% from April 2022.
Sadly, it looks like the threshold at which employers pay National Insurance on their team’s wages is not increasing in line with this employers’ allowance threshold.
For innovating companies
You may have come across Research and Development tax credits if you’ve been involved with innovating a new product as a company. This is a pretty generous system that can earn your limited company a tax refund.
It’s all the small print, but the headline is, it now includes more stuff you can claim!
The government are continuing to enhance this relief in the hopes of stimulating further innovation, and therefore productivity.
Additional news for households
There will be a 5p reduction in fuel duty until March 2023, making fuel a little cheaper.
If you are looking at solar and other energy saving materials, you are now unlikely to end up paying VAT to the people fitting it. This is because the government have allowed a ‘zero rating’ to certain types of supplies in this area.
More help potentially on the way for businesses?
During his speech, the Chancellor mentioned there would be further tax and support reviews as part of a ‘Tax Plan’ for small business, starting with the Autumn Statement later in the year.
The Chancellor spoke about business investment being a ‘focus’, which usually indicates they may positively tweak the capital allowances rates. This could be similar to the Super Deduction previous announced. We just don’t know yet, but it seems to be the feel from the detailed policy document.
The government have also published a Tax Plan, laying out their intention to ‘take a principled approach to cutting taxes’. This was an interesting read to understand their commitment to reduce taxes.
More resources to HMRC and the DWP
Not headline making, but the government is spending £161m over the next five years on HMRC to increase ‘compliance and debt management capacity’. They are also spending £510mn to increase fraud detection in the DWP.
The small print
If you want to read for yourself, here is the detailed document released by the Chancellor.
Keeping on top of tax and other changes
If you don’t have an accountant, or feel you aren’t informed of recent tax changes and opportunities by your current accountant, we’d love a chat about how we can help.
We spend a lot of time keeping up to date, so we can help our clients keep more of their income, pay less tax and not panic every time Rishi announces something new!