At the end of last month, Chancellor Rishi Sunak delivered his Spring Statement in the midst of a genuine living crisis, and the highest public debt in decades.
The war in Ukraine, the final rumblings of COVID-19, and large bottlenecks to the world’s economic supply chains have seen a large increase in inflation.
Many were looking for Sunak to announce something positive to really help UK businesses and individuals get themselves onto a firmer footing.
Let’s look at what he announced, and what it means for you.
National Insurance points
Many were optimistic that Sunak would scrap the 1.25% National Insurance contributions (NICs) increase that he announced back in October.
This wasn’t addressed, with Sunak’s only respite being a raise in the threshold at which NICs are paid.
This means that the class 1 NICs threshold and lower profits limit for class 4 NICs, will increase to £12,570 from 6 July 2022, bringing them in line with the personal allowance for income tax.
Income tax
Sunak also announced that the Government intends to make the first cut to the basic rate of income tax in 16 years.
Income tax will be cut from 20% to 19% from April 2024 – there will be no changes to the higher (40%) and additional (45%) rates, however.
Fuel duty
With the price of fuel rising to a record level in early 2022, the government had to do something to help the people of the UK out.
Sunak announced a cut to fuel duty by 5p per litre – representing a saving of £100 for the average car driver over the next 12 months, or £200 for the average van driver and £1,500 for the average haulier.
Employment allowance
The employment allowance also saw an increase – from £4,000 to £5,000 in 2022/23.
This allows eligible employers to reduce their NICs liability, and the government advises that this should stop 50,000 small businesses from paying NICs on employment completely.
Future business tax reform
With the super-deduction tax relief set to end in April 2023, Sunak said he planned to consult on future tax changes to encourage more business investment.
There will also be an examination into the ways in which the tax system, including the apprenticeship levy, can support employers as they invest in adult training.
So what does this mean?
It’s a mixed bag. While many of these changes appear to be a good thing for small businesses – namely a higher employment allowance, and investment incentives – the ever-growing costs of doing business and high price of living are challenging the country and dividing public opinion.
Amid the largest tax burden the UK has seen since the Second World War, many are questioning how they can continue to run a successful business, manage their team effectively, and still come up running a healthy profit.
And for those on the breadline, Sunak’s statement has done little to offer any real support other than token gestures and promises for the future.
Talk to us
We’re tax and accounting experts, and we’re here for you and your business. Whether you need some advice, a dedicated strategy, or just to find out more about the statement, get in touch today and we’ll be happy to help.