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business finance  •  Business Services  •  Business Tax  •  Personal tax  •  Personal Taxation

More help coming but not quite yet…Chancellor’s Spring Statement 2022

By RJP LLP on 23 March 2022

Some interesting developments are on the horizon for businesses, with extra tax reliefs and income tax cuts promised in today’s Spring Statement Budget. The only snag is, whilst they all sound great, the policy details were often very vague and many of the cuts won’t actually be available for some time. Today’s article explains the Chancellor’s headline announcements, with their implications for readers.

Even if things hadn’t got worse after the Covid pandemic, this was always going to be a difficult Budget to deliver. The situation in Ukraine has further intensified existing economic uncertainty and Rishi Sunak expressed this with an update to the UK’s economic forecasts. “There is unusually high uncertainty around the outlook, and it is too early to know the full impact on the UK economy,” he said.

Forecasts for the UK’s economic growth have already been revised and are now 3.8% for this year and 1.8% for 2023. Prices have risen at their fastest rates for 30 years – by 6.2% in the last 12 months. The annual inflation rate is likely to average 7.4% for the rest of this year, with peak of 8.7% in the final quarter of 2022. Everyone is feeling the squeeze now.

To help ease these financial pressures and counter the negative impact of the Health and Social Care Levy, the basic rate of income tax will be cut from 20p to 19p – but this will only be introduced by the end of the Government’s term in 2024. It is quite a long way off and the new Social Care Levy on the other hand becomes operational by 6 April 2022, with a 1.25% increase in the rates of Class 1 NIC for employees and employers and Class 4 NICs for the self-employed. How helpful the tax cut will really be remains to be seen because many people need short term help right now.

Sunak also unveiled a ‘Future Tax Plan’ in which he set out “three priorities for this autumn” – around people, capital, and ideas.

For the ‘people’ category, he is increasing the National Insurance contributions threshold by £3,000 from this July to £12,570, as a way to “fully equalise NICs and income tax thresholds”. Sunak said this equated to a “£6bn personal tax cut”, which would benefit 30m people and see 70% of people benefit in some way once the changes were fully operational.

Other measures intended to help Joe Public during difficult times were a 5p-per-litre cut in fuel duty until March 2023, effective from midnight on 23 March, and zero-rating VAT on energy efficiency investments by homeowners for items like solar panels and heat pumps. Sunak also said he would be doubling the household support fund to £1bn.

It was within the ‘capital’ category that most announcements were less concrete, with the Chancellor talking of his ambitions to develop a “new culture of enterprise”. This would include the future reform of R&D tax credits, to be unveiled in the main Autumn Budget. He suggested that the revised policies could include the available categories for R&D tax relief being further widened beyond the increased scope for cloud technology and data services, with an offer of more generous tax rebates to encourage innovation. We will have to watch this space.

Sunak also said he was considering cutting the tax rates on business investment (capital allowances) to further compensate companies once the super deduction tax relief comes to an end and the increase to corporation tax becomes effective.  Again, not much detail was released today.

One change that will be effective quickly is a rise to employment tax relief for small business owners. To help boost employment levels, the Chancellor said the Employment Allowance, which offers tax relief to smaller businesses for their National Insurance payments, will increase to £5,000 from April 2022.

It is possible that further details of these changes will be announced in the coming weeks, and we will update you as information becomes available. In the meantime, if you would like to discuss your current business or personal tax circumstances in more detail, please contact us via partners@rjp.co.uk.

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Some interesting developments are on the horizon for businesses, with extra tax reliefs and income tax cuts promised in today’s Spring Statement Budget. The only snag is, whilst they all sound great, the policy details were often very vague and many of the cuts won’t actually be available for some time. Today’s article explains the Chancellor’s headline announcements, with their implications for readers.

Even if things hadn’t got worse after the Covid pandemic, this was always going to be a difficult Budget to deliver. The situation in Ukraine has further intensified existing economic uncertainty and Rishi Sunak expressed this with an update to the UK’s economic forecasts. “There is unusually high uncertainty around the outlook, and it is too early to know the full impact on the UK economy,” he said.

Forecasts for the UK’s economic growth have already been revised and are now 3.8% for this year and 1.8% for 2023. Prices have risen at their fastest rates for 30 years – by 6.2% in the last 12 months. The annual inflation rate is likely to average 7.4% for the rest of this year, with peak of 8.7% in the final quarter of 2022. Everyone is feeling the squeeze now.

To help ease these financial pressures and counter the negative impact of the Health and Social Care Levy, the basic rate of income tax will be cut from 20p to 19p – but this will only be introduced by the end of the Government’s term in 2024. It is quite a long way off and the new Social Care Levy on the other hand becomes operational by 6 April 2022, with a 1.25% increase in the rates of Class 1 NIC for employees and employers and Class 4 NICs for the self-employed. How helpful the tax cut will really be remains to be seen because many people need short term help right now.

Sunak also unveiled a ‘Future Tax Plan’ in which he set out “three priorities for this autumn” – around people, capital, and ideas.

For the ‘people’ category, he is increasing the National Insurance contributions threshold by £3,000 from this July to £12,570, as a way to “fully equalise NICs and income tax thresholds”. Sunak said this equated to a “£6bn personal tax cut”, which would benefit 30m people and see 70% of people benefit in some way once the changes were fully operational.

Other measures intended to help Joe Public during difficult times were a 5p-per-litre cut in fuel duty until March 2023, effective from midnight on 23 March, and zero-rating VAT on energy efficiency investments by homeowners for items like solar panels and heat pumps. Sunak also said he would be doubling the household support fund to £1bn.

It was within the ‘capital’ category that most announcements were less concrete, with the Chancellor talking of his ambitions to develop a “new culture of enterprise”. This would include the future reform of R&D tax credits, to be unveiled in the main Autumn Budget. He suggested that the revised policies could include the available categories for R&D tax relief being further widened beyond the increased scope for cloud technology and data services, with an offer of more generous tax rebates to encourage innovation. We will have to watch this space.

Sunak also said he was considering cutting the tax rates on business investment (capital allowances) to further compensate companies once the super deduction tax relief comes to an end and the increase to corporation tax becomes effective.  Again, not much detail was released today.

One change that will be effective quickly is a rise to employment tax relief for small business owners. To help boost employment levels, the Chancellor said the Employment Allowance, which offers tax relief to smaller businesses for their National Insurance payments, will increase to £5,000 from April 2022.

It is possible that further details of these changes will be announced in the coming weeks, and we will update you as information becomes available. In the meantime, if you would like to discuss your current business or personal tax circumstances in more detail, please contact us via partners@rjp.co.uk.