The chancellor has today delivered his "Spring Statement", primarily focusing on his new "Tax Plan", designed to help ease the cost of living crisis, promote growth and "redistribute" the subsequent proceeds. He spoke against a backdrop of inflation hitting an eye watering 6.2% for the 12 months to February 2022, and an expectation that this will average 7.4% for the rest of the year.
We have summarised the key announcements below, with a detailed write up to follow once we have reviewed the written published statement.
Fuel Duty - Fuel duty to be cut from 6pm today by 5p a litre, to help offset some of the recent price escalation. The cut is to remain in place for at least 12 months.
Increase in National Insurance Threshold - The National Insurance threshold will increase to £12,570, a rise of almost £3,000. This means from July, taxpayers can earn up to £12,570 in a tax year without paying any national insurance - bringing the threshold in line with income tax.
While this obviously has a direct effect on taxpayers, it will also have a knock on effect on corporation tax for those owner managed companies currently paying their director the "directors minimum" - in essence this could theoretically mean the directors minimum salary is increased without incurring additional NI, which will reduce profit and in turn corporation tax.
Proposed reduction in basic rate of income tax from 2024 - Main rate tax to fall from 20% to 19%, which although represents a tax cut as such, may not have a great deal of effect given that basic rate allowances are likely to be frozen and the ongoing rate of inflation essentially creating "fiscal drag".
Increase in Employment Allowance - As part of encouraging growth and job creation, the employment allowance has been increased by another £1,000 to £5,000, allowing eligible employers to reduce their annual National Insurance liability by up to £5,000 - This comes into effect in just three weeks time.
VAT cut on energy saving materials -
VAT has been reduced from 5% to 0% for a minimum of 5 years, on energy saving materials used in residential properties, such as solar panels, heat source pumps and insulation.
We'll be following up on all these points shortly however if clients have any questions in the meantime as to how these changes directly effect them, please do not hesitate to get in touch.