Spring Statement 2022 – a summary of the key points

Spring Statement 2022 was announced by the Chancellor, Rishi Sunak on 23 March 2022. Whilst much of the Spring Statement reconfirmed announcements first made in the 2021 Autumn Budget, several new tax announcements were made by the Chancellor. He also published a Tax Plan, which is intended for the remainder of the current parliamentary term.

Fuel duty, as expected, was cut and rather than postpone or cancel the Health and Social Care Levy, National Insurance thresholds were increased.

There were no real surprises, other than the proposed cut to the standard rate of Income tax in 2024. Further R&D reforms were announced and Employment Allowance was increased to £5,000.

What does the Spring Statement mean for your current and future plans?

If you would like Alexander & Co to review your current situation or discuss how the Spring Statement could affect your future plans, please contact us and we will be happy to discuss this with you.

Below, we have summarised some of the key issues that are likely to affect both businesses and individuals.

The Chancellor’s ‘Tax Plan’ announced in the Spring Statement 2022

As part of the Spring Statement, the Chancellor set out the Government’s Tax Plan, described as a three-part plan to strengthen the economy over the remained of the parliamentary term.

The first part of the plan includes the Spring Statement tax cuts. Secondly, the plan looks at long term goal reforms to incentive business to invest more. Announcements of how this will be achieved will be provided in the 2022 budget, in the Autumn. The final part of the plan is to reduce tax, to which the proposal to cut the basic rate of income tax by 1% in 2024 forms the basis of this. You can view the tax plan here.

Fuel Duty temporarily reduced by 5 pence in the pound

Duty on petrol and diesel was cut in the Spring Statement by 5 pence per litre for a temporary 12-month period. This takes effect from 6 pm on 23 March, across the UK.

The Chancellor stated that this is the largest cash-terms cut across all fuel duty rates at once. It is also only the second time in 20 years that the main rates of petrol and diesel have been cut at all.

National Insurance thresholds to increase

The Chancellor confirmed that the annual National Insurance Primary Threshold and Lower Profits Limit, for employees and the self-employed respectively, will increase from £9,880 to £12,570 from July 2022.

Mr Sunak stated that these increases will benefit almost 30 million people, with a typical employee saving over £330 in the year from July.  After accounting for the introduction of the Health and Social Care Levy, around 70% of National Insurance contributions (NICs) payers are estimated to be paying less NICs.

From April 2022, self-employed individuals with profits between the Small Profits Threshold and Lower Profits Limit will not pay Class 2 National Insurance contributions (NICs).

It is estimated that this change represents a reduction in tax for circa 500,000 self-employed workers, worth up to £165 per year.

Employment Allowance to increase to £5,000

From April 2022, Employment Allowance will increase by £1,000 for eligible employers, meaning they will be able to reduce their employer National Insurance contributions’ (NICs) bills by up to £5,000 per year.

As a result, businesses will be able to employ four employees full time on the National Living Wage (NLW) without paying employer National Insurance contributions.  It is claimed that this measure will benefit almost half a million businesses, including circa 50,000 businesses which will be taken out of paying National Insurance contributions and the Health and Social Care Levy entirely.

Review of the Apprenticeship Levy following Spring Statement 2022

In the Tax Plan, it outlines that the Government will encourage businesses to offer more high-quality employee training and it will explore whether the current tax system, including the operation of the Apprenticeship Levy and to consider if is doing enough to incentivise businesses to invest in the right kinds of training.

Previously announced measures featuring in the Spring Statement

Several useful measures that had been previously announced featured again in the Spring Statement. These include:

• AIA is being extended to 31 March 2023, allowing the increased rate from £200,000 to £1 million up to this date
• Super Deductions, allowing 130% first year’s relief

Further information on Super Deductions is available here

Further R&D reforms on the agenda

In the Spring Statement, the Chancellor confirmed that research and development tax reliefs (R&D) are to be reformed further, and this will be announced at the 2022 Budget in the Autumn.

The Chancellor also announced the inclusion of mathematics into qualifying R&D expenditure, acknowledging the increasing volume of R&D undertaken underpinned by pure mathematics. The inclusion of pure maths is aimed at supporting specific sectors, including robotics and AI, alongside manufacturing and design.

The previously announced measures reconfirmed in the Spring Statement, include expanding the qualifying expenditure to include cloud consulting and data costs, which is a welcome announcement and could lead to significant savings for clients who operate in these areas.

Please contact us to discuss whether R&D tax can free up capital for your business. We work with many varied clients in this area, having recently secured circa £500k for one client. Further information on our R&D services can be found here.

And finally – the Spring Statement 2022 announced that basic rate income tax is to be cut…. from 2024

As mentioned above, scheduled for the final year of the current parliamentary term, is the proposal to reduce the basis rate of income tax by 1% to 19% from April 2024.

This is a tax cut in excess of £5 billion a year, representing the first cut in the basic rate of income tax in 16 years.

This is to apply to the basic rate of non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland; the savings basic rate which applies to savings income for taxpayers across the UK and the default basic rate, applicable to a very limited category of income taxpayers made up primarily of trustees and non-residents.

Contact Alexander & Co

For further advice on any of the topics covered in this update, or to discuss any other business matters, please do not hesitate to contact us on 0161 832 4841, email info@alexander.co.uk or compete the contact form on this page.