Spring Statement 2022 Summary
Mounting costs for all of us forced the UK Chancellor Rishi Sunak to deliver a more extensive Spring Statement this March than first envisaged. Although he was keen to stress that the measures needed to address inflation will require more than one statement, he took the opportunity to accelerate some spending plans now. This comes ahead of a predicted average inflation rise of 7.4% for the rest 2022, according to the OBR – ending up at 8.7% in Q4.
Overall, the Spring Statement was light on measures for business. Instead, it chose to focus on easing rising household costs.
Here are the headline measures to note:
The threshold at which working people will start to pay National Insurance has been hiked up by £3,000 to £12,570 to bring the payments in line with income tax personal allowance. It equates to an average saving of £330 a year for employees and £250 if you’re self-employed. The move will most benefit lower earners – although Universal Credit tapering will reduce the benefit by around half on average.
The National Insurance and dividend rise of 1.25% will still go ahead for employees and employers.
Fuel duty will be cut by 5p a litre, which will come into effect from 6pm on 23 March 2022 and will be in place for one year. This will equate to just over £1 saving per tank for the average motorist.
VAT will be abolished on insulating homes
Currently, if you install a heat pump, solar panels, and other energy efficiency measures, you will be charged VAT. The Spring Statement announced that the VAT will be cut altogether, which will provide future savings.
A promise that the basic rate of income tax will be cut by 1% from 2024 to 19%. Again, another measure that will provide savings in future years but no further details on this yet.
Increase to Employment Allowance
This will be increased from £4,000 to £5,000 from April 2022, which will benefit around 495,000 businesses, according to the Government.
Research and Development tax relief changes
To combat low productivity and better uptake of R&D support, the Spring Statement extended qualifying expenditure to include all mathematics. This builds on a previous announcement to R&D tax reliefs to include data and cloud computing costs. The government will announce further R&D reforms in the Autumn Budget 2022, along with reforms to business investment taxes.
VAT Rates in the Leisure and Hospitality Sector
No extension has been granted to the leisure and hospitality sector for use of the reduced 12.5% VAT rate on eligible supplies including food, non-alcoholic beverages and hotel and holiday accommodation. The VAT rate applied to these supplies will revert to 20% from 1 April 2022 as planned.
Count on Cardens
Count on Cardens to know the latest measures to affect your business. If you would like to discuss any of the announcements outlined above, please get in touch with your usual Cardens team.