How Will the New Spring Statement Affect You?
Yesterday, Chancellor Rishi Sunak delivered the Spring Statement, where he outlined plans to deliver the biggest net cut to personal taxes in over a quarter of a century, whilst supporting economy growth, businesses, and working families across the UK.
In this article, our experienced tax advisors highlight exactly what the statement means for you.
What are the changes?
From cutting fuel duty to cutting basic rate income tax, these changes are aimed to help families with the cost of living, boost growth in the economy and ensure the proceeds of growth are shared equally.
More income for employees
The National Living Wage will rise to £9.50 an hour from April 2022, giving an extra £1,000 a year to full-time workers. The threshold for paying National Insurance will increase by £3,000 from July 2022, which means a payee will be able to earn £12,570 without paying income tax or National Insurance.
The chancellor also announced that the basic rate of income tax will be cut by 1p before the end of this Parliament in 2024. This cut to the basic rate is the first in 16 years.
Fuel duty is reducing
A 5p fuel duty cut per litre was announced for both petrol and diesel, which will last 12 months. The Chancellor said it would represent the “biggest cut to fuel duty rates ever”.
This cut represents a £5 billion saving over the next 12 months, which equates to approximately £100 for the average car driver, £200 for the average van driver, and £1,500 for the average haulier.
Green Tax Cut – End of VAT Payment
To help combat higher prices in energy bills, the Chancellor announced that for the next five years, homeowners who pay to have heat pumps and insulated materials installed such as solar panels will no longer pay five percent VAT.
Mr. Sunak was quoted saying:
“A family having a solar panel set installed will see tax savings worth £1,000 and savings on their energy bill of over £300 per year.”
Incentives for the private sector
One of the main areas highlighted by Mr. Sunak was plans to create conditions for the private sector to grow, boost productivity and encourage investment in capital.
Employment Allowance is increasing
To support small businesses, the Spring Statement includes an increase in Employment Allowance to £5,000 from April 2022. Half a million businesses will benefit from this, with a tax cut worth up to £1,000 each.
More incentives to invest in capital
The government highlights the long-standing issue with productivity in the UK, caused by the lack of investment in capital. Consequently, they will offer incentives to encourage businesses to invest, whilst still ensuring value for the taxpayer.
Super-deduction, a two-year business cut introduced in 2021, was created to encourage businesses to invest in productivity-enhancing assets to help them grow. After the super-deduction ends in April 2023, the government is planning policies that drive businesses forward for productivity growth to invest in capital, people, and research. These policies will be announced at the Budget later this year.
Businesses are being encouraged to invest in training
According to the Spring Statement, UK companies are spending less than half the European average on training their employees.
It is vital for any business to have their employees trained with the right skills to deliver the best productivity of their work.
The tax plan includes a review of the Apprenticeship Levy, which encourages businesses to invest in high-quality training for their employees and create apprenticeships. This review will check if the levy incentives investments “in the right kind of training”.
Improvements to Research and Development tax reliefs
The government is increasing the Research and Development budget by £5 billion in order to support scientific breakthroughs and innovation, which is vital to support growth in the UK economy. More improvements and reforms on the R&D tax reliefs will be announced in the next Fall Budget.
Do you need further help to understand how you can benefit from this?
At Edwards Accountants, our team is built up of various tax specialists who will be able to support you in understanding the Spring Statement and help, if applicable to minimise your tax obligations whilst fulfilling all legal requirements. Find out more by contacting us:
For our West Midlands Offices:
Tel: 01922 743 100
