On Wednesday 23rd March, Chancellor Rishi Sunak delivered his Spring Statement, aka “mini-budget” to Parliament.
With heavy emphasis on the impact of the war in Ukraine and the cost of living crisis, the Chancellor said he would respond by building a stronger, more secure economy for the UK.
Here are the main points of the Spring Statement:
- Despite calls to scrap or delay it, the plans for a 1.25% rise in National Insurance contributions will go ahead from 6th April 2022, as a “dedicated funding source” for health and social care.
- However the threshold for Employees NIC will increase to £3000 from July, putting it on a par with the personal income tax allowance of £12,570.
Cost of living
- Fuel duty to be cut for only the second time in 20 years, by 5p a litre for the next 12 months.
- The current 5% VAT for households installing energy saving measures like solar panels, heat pumps and insulations will be cut to 0%
- The Chancellor pledged to double the government’s household support fund to £1bn.
- Basic rate income tax is to be cut from 20%to 19% in 2024.
- Mr Sunak said it would not be responsible to make such a tax cut right now, given the current economic uncertainty.
- Forecasts from the Office of Budget Responsibility showed the economy would grow by 3.8% this year.
- GDP is anticipated to grow by 1.8% next year, 2.1% in 2024, 1.8% in 20254 and 1.7% in 2026.
- Research and development tax reliefs are to be extended.
- The employment allowance for small business will increase to £5000 from the new tax year.
- The government is to cut tax rates on business investment at the Autumn budget.
Too long didn’t read? Not to worry! For the majority of our readers the Spring Statement measures which will have the biggest effect on personal income and living standards are:
- Increased rate in NIC is definitely going ahead
- The impact of this will be lessened with an increase in the threshold at which you pay NI (effective form July 2022)
- 5p cut in fuel duty will be welcomed by drivers as prices at the pumps continue to rocket
- A future cut in basic rate income tax (from 20% 19%) from 2024.
If you are a Liquid Friday contractor, we can give you a personal calculation based on your individual circumstances, so you know what to expect to take home – just get in touch with the team.