Spring Statement 2022
On 23 March 2022, Chancellor Rishi Sunak delivered the Spring Statement. It was his first since 2020, following not one but two Budgets in 2021. The chancellor declared he would cut fuel duty, raise the threshold at which people begin to start paying National Insurance, and announced a cut to the basic rate of income tax before the next general election.
What were we expecting?
The 2022 Spring Statement was expected to review the economic situation and adjust forecasts. It was not supposed to include anything significant about tax. Of course, things have changed dramatically since October. There is a war in Ukraine, energy prices are rising sharply, and inflation has returned to levels last seen in the early 1990s.
Our Spring Statement Summary covers the most important points and how they affect businesses and individuals.Read our full Spring Statement Summary
Mr Sunak’s speech contained more on tax than almost anyone could have expected. He started with a temporary cut in fuel duty, expected to save the average motorist about £100 in the next year. The reduction is set at 5p per litre. As VAT is charged on top of the duty, this should in total reduce the tax by 6p per litre.
He went on to remove VAT from the installation of energy-saving materials in houses, which will save money for a smaller number of people. He announced that the VAT payable on ‘energy-saving materials’ would go from five per cent to zero from April for five years.
Then he declared that he intended to implement a ‘tax plan’ going forward. The overall aim is to bring taxes down year on year over the life of the Parliament. This included a rise in the National Insurance Contribution thresholds to apply in July 2022. That will mean that 70% of people will pay less NIC despite the introduction of the 1.25% increase that will apply from April.
National Insurance Contributions
The level at which national insurance contributions (Nics) start to be charged will rise from its current level of £9,880. From July, workers will not make NI contributions until they earn £12,570 a year.
Employment Tax Allowance
He went on to increase this relief from Employers’ NIC for small businesses, and to promise a cut in the basic rate of income tax from 20% to 19% in April 2024.
- Dividend Income: The tax rates on dividend income over £2,000 will increase for the tax year 2022/23.
- National Living Wage: The NLW will increase by 6.1% for individuals aged 23 and over to £9.50 per hour from 1 April 2022.
- Working from home: The more generous claims for tax relief will come to an end in the next tax year.
- Business Tax: The UK government will cut and reform tax on capital investment by businesses.
- Uncertain tax treatments: The law has been changed to require very large companies and partnerships to notify HMRC where they take a tax position in their returns for VAT.
- VAT Reform: The rules for late payment of VAT will be reformed for return periods beginning on or after 1 January 2023. (This was delayed from the intended introduction of the new rules on 1 April 2022).
- Property: Owners of holidays homes will have to prove that they let their property for at least 140 days a year to qualify for small business rates relief (SBRR).
- Annual Tax on Enveloped Dwellings (ATED): Rates increase automatically each year in line with inflation.
Read our Spring Statement Summary
The announcement of significant tax changes several times a year, to apply from different dates, makes it hard to keep track of what is changing and when, and how it affects your finances.
In our Spring Statement Summary we have set out the latest proposals and their impact. It also includes a reminder of significant measures from the two Budgets in 2022 and other separate announcements.
We will review the new proposals to ensure we offer our clients the best advice to help them remain as tax efficient as possible. And our colleagues at Carpenter Box Financial Advisers are always on hand to help manage investments and pensions.
If you would like more detailed one-to-one advice on any of the issues raised in the Budget, please get in touch or give us a call on 01903 234094.