The Spring Statement March 2022
Key Points from Rishi Sunak’s Spring Statement March 2022
Chancellor Rishi Sunak delivered his ‘mini-budget today on 23rd March 2022
Rishi Sunak’s Remarks
- The Chancellor confirmed he has targeted action on the cost of living and has built a ‘margin of safety’ into his spending plans, responding to uncertainty by building a stronger, more secure economy for the UK.
- The National Insurance threshold will be raised by £3,000 to £12,570. This means from July 22, there will be no National Insurance or Income Tax to pay before earning £12.570, saving the typical person around £330 per annum.
- However, from 6th April 2022, the Government’s new social care levy sees UK-wide tax and National Insurance Contribution (NICs) increases.
- The levy will be a new tax, separate from NICs; a surcharge of 1.25% which will replace the increase in NICs rates and will also apply to those working above State Pension age.
- The employment allowance will rise to £5,000 from £4,000 in April 2022. This allowance is for businesses who have employees and saves companies paying Employer National Insurance, up to a limit of £5,000.
Basic Rate Tax
- Basic Rate of Income Tax will be cut from 20% to 19% by 2024.
- In addition to the social care levy, dividend tax rates will also increase by 1.25% across the board to 8.75% for the basic tax band, 33.75% for the higher rate tax band and 39.35% for the additional rate band from 6th April 2022.
National Minimum Wage
- The national living wage will increase from £8.91 to £9.50 an hour from 6th April 2022.
Annual Investment Allowance Extended
- The £1m Annual Investment Allowance will not end in September 2021 but will be extended to March 2023.
- The Chancellor made no reference to VAT, meaning the reduced rate of VAT rate set at 12.5% on 1st October 2021 will return to the standard rate of 20% from 1st April 2022.
- From April 2023, Companies with profits of less than £50,000 will remain at 19%.
- The rate of corporation tax for companies with profits over £50,000 will increase, up to 25%.
- The rate will be tapered so that only businesses with profits of more than £250,000 will be taxed at the full 25% rate, which means only 10% of companies will pay the full higher rate.
- However, where there are associated companies, the thresholds are divided by the number of companies, so all have an equal share of the limits.
- With two associated companies it will mean paying equivalent corporation tax of 26.5% on profits over £25,000.
The Super Deduction
- The government invested £25bn, allowing a 130% super-deduction on tax for investments made by companies. This means firms can cut their taxes by up to 25p for every pound they invest from April 2021 to March 2023.
- The personal allowance will remain at £12,750 until 2026.
- The higher-rate threshold will increase to £50,270 in April 2022 and will remain at that level until 2026.
Fuel Duty and Green Energy
- Fuel duty will be cut by 5p per litre from 6pm tonight until March 2023.
- VAT to be scrapped for green energy. Homeowners will pay zero % VAT when installing heat pumps and solar panels for the next five years.
The Chancellor ended his statement by saying “My Tax Plan delivers the biggest net cut to personal taxes in over a quarter of a century”