As the nation faces a cost-of-living disaster, Chancellor Rishi Sunak delivered his 2022 Spring Statement, the main points of which we have set out below.
The Office for Budget Responsibility predicts that the UK economy will grow by 3.8% this year whilst also hitting inflation levels of 7.4%. They have also predicted that inflation will not be back under control until 2024.
Changes impacting employers and employees:
- The National Insurance threshold is being raised to £12,570 from July 2022.
- The basic rate of income tax will be lowered from 20% to 19%. However, individuals will have to wait for this cut as the Chancellor confirmed it would not come into effect until “before the end of this Parliament” in 2024.
- The Employment Allowance will increase to £5,000 in two weeks’ time. This Allowance allows certain companies to reduce their yearly national insurance liability, and currently stands at £4,000.
- The Chancellor has pledged to reform R&D tax credits and expand the generosity of these to include data, cloud computing and pure maths. The Treasury will also consider whether to make R&D expenditure credit more generous.
- The Chancellor also confirmed the apprenticeship levy will be assessed and reviewed as part of the government’s new tax plan, to determine whether it is doing enough.
- Tax rates on business investment shall be cut in the Autumn Budget. However, the details of this have not yet been confirmed or worked out.
Responsibility predicts that the UK economy will grow by 3.8% this year whilst also hitting inflation levels of 7.4%.
Other changes:
- There will be a 5p-a-litre cut to fuel duty which will come into effect at 6pm this evening and will last for one year, until March 2023.
- The Government’s household support fund, which helps councils support vulnerable households will be doubled to £1bn from April.
- The VAT payable by households on energy saving materials such as solar panels or insulation will be reduced to zero for the next five years. It currently stands at 5%.
The Spring Statement falls short of the action employers and employees were hoping to see today, perhaps even a feeling of ‘too little too late’. Despite some welcome announcements such as an increase to the Employee Allowance, the changes do not go far enough to address the huge cost pressures employers are facing in such a challenging time for business.
