The Spring Statement – March 2022
Against the background of a cost of living crisis and the war in Ukraine, Rishi Sunak yesterday presented the Spring Statement. It’s usually only an update on the position of the economy and updated forecasts for coming years, but for this one he was under some pressure!
Inflation in February was reported just hours before he spoke, at 6.2%, a 30-year high. The energy price cap is due to be lifted at the end of the month, and average inflation for the year is forecast at 7.4%.
You can download our summary by clicking the button below:
So, what did Rishi come up with?
Full details are in the summary above, but if you’re in a hurry, these are the headlines:
- A cut in fuel duty by 5p per litre until March 2023, effective 6pm Wednesday 23rd March. (In reality, this reduction is enhanced by the fact that VAT on fuel is calculated AFTER Duty is added, so there is less VAT to pay too.)
- An increase in the national insurance threshold by £3,000, effective July 2022. This means an amount of £12,570 can be earned before any deductions will be made for income tax or National Insurance.
- A 1p cut in income tax in 2024, the end of this Parliament.
- Abolition of VAT on energy saving materials, such as solar panels, heating pumps and insulation, for five years. This is only possible following Brexit.
- Employment Allowance to increase by £1,000, effective 2022, making it cheaper for businesses to afford to recruit. Sadly, there is no magic wand for those people struggling to find skilled staff!
The Tax Plan
Also announced was a new Tax Plan, designed to build a stronger economy through reforming the tax system. More will come in this Autumn’s Budget, but the key points of the Plan include:
- A revision of the Research & Development Tax Reliefs.
- A review of the current incentives for businesses to invest in training, which will include the Apprenticeship Levy.
- Identify a replacement for the current Super Deduction, to encourage business investment.
The Tax Plan and its goal of reforming the tax system while ‘improving conditions for growth and allowing people to retain a fair share of the proceeds of their hard work’ is an announcement that we like the sound of!
The proviso of course, is that the Treasury listens to small businesses, rather than the corporates, and doesn’t bury them under rafts of changing legislation in a short timescale!
Small businesses make up the largest percentage of UK businesses, and have been hardest hit by the challenges of the last two years. They need the time to recover, before they are forced to face a deluge of change.
Whatever the outcome of the various consultations and discussions, we’ll keep you posted!
You can see the full Tax Plan document here.
NEW – The Public Sector Fraud Authority
The government is going to provide £48.8m worth of funding over three years to support the creation of a new body to work with the counter-fraud work by the British Business Bank and the National Intelligence Service.
Details are thin at the moment, but Spring Statement documents say the new body will help enable government and enforcement agencies to ‘step up their efforts to reduce fraud and error, recover millions of pounds lost to fraud and bring fraudsters to justice’.
As always, we only find out the content of the Spring Statement as the Chancellor speaks, so we’ve been devouring the detail! If you have any specific questions, please get in touch. We’ll keep you up to date as we find out more.