Rishi Sunak’s statements to the house thus far during his tenure as chancellor have been primarily aimed at relieving the financial stress on individuals and businesses caused by the pandemic. On this occasion however, it is against a backdrop of high inflation and a looming cost of living crisis that he took to the dispatch box.
His ‘big freeze’ mini-budget in the spring of 2021 fixed most tax rates and thresholds until 2025 and there were no real changes in this regard once again.
So what were the key announcements in the Spring Statement?
- Fuel Duty Cut – In an attempt to alleviate the spiking cost of fuel at the pumps, it was announced that fuel duty would be cut by 5p per litre for 12 months.
- Economy – In the Autumn Budget, the chancellor struck an optimistic tone for UK GDP but the latest OBR (Office for Budget Responsibility) figures have been considerably less upbeat. The Russia-Ukraine conflict and the spiking cost of energy is projected to cause inflation to hit 8.7% by October this year and the GDP forecast of 6% in Autumn has been downgraded to 3.6% for the year. Living standards are not expected to return to pre-pandemic levels until 2024/25.
- National Insurance – Despite pressure from some MPs to delay it’s introduction, the new 1.25% Health and Social Care Levy to fund investment in the NHS and social care will be introduced as planned. The Levy will apply UK wide, to the same population and income as Class 1 (Employee, Employer) and Class 4 (Self Employed) NICs, and to the main and additional rates. However, Sunak did announce a £3,000 increase to the threshold at which NI becomes payable to £12,570 from July. A useful article with more detail can be found here.
- Employment Allowance – Employers who claim employment allowance will see some savings with the threshold for this allowance on Class 1 NI contributions increasing from £1,000 to £5,000.
- Solar Panels – Sunak also announced that he will be scrapping the 5% VAT for homeowners who have solar panels, heat pumps and insulation installed. These changes will come into effect April 2022 and last for five years, until 2027.
It is worth repeating that the freezing of thresholds for taxation will have the effect of raising the treasury tax take over the coming years and increases the value of financial advice in ensuring that you don’t overpay tax over the coming years.
So, in summary, no large changes to the fiscal landscape, the chancellor evidently taking a ‘wait-and-see’ approach for the time being. We can expect more announcements come the Autumn budget, particularly if the outlook for inflation worsens.