The Spring Statement 2022 featured some unexpected twists that will shape the future for businesses. Here are the key points.
(4 minute read)
Today’s tax tip will explain:
- The main points outlined in the Spring Statement 2022
- What the changes mean for you
- What to expect in the future
The Spring Statement is typically a modest affair. But with an exponentially worsening cost of living crisis, fuel fears and international turbulence, we waited with bated breath for government plans. The results were mixed.
Even More National Insurance Changes!
National Insurance has been a hot topic since the 1.25% increase was announced last year. However, many hoped for a U-turn in the wake of the cost of living crisis.
This U-turn hasn’t arrived in the Spring Statement 2022. Instead, the government is drastically changing the rate at which taxpayers begin making NI contributions. Effectively pushing thousands below the threshold, so they won’t have to pay.
The threshold will rise to £12,570 to match the Personal Allowance.
This is good news for the self-employed and employees alike, as it’s expected that around 2.2 million will no longer be liable for NI contributions.
The government is also reducing NI contributions for the self-employed by removing the need to pay Class 2 NI contributions between the Small Profits Threshold (£6.725) and the new rate.
As a result, you can build gain NI credits without having paying anything if your earnings fall within the band.
VAT for Energy Saving
Homeowners buying energy saving materials such as solar panels and insulation already enjoy reduced VAT (at 5%).
This is now set to get even lower. VAT on energy saving materials will be cut to 0%.
This includes solar panels, wind and water turbines, heat pumps and insulation among other energy saving items.
As expected, fuel duty has been cut in response to rapidly rising costs. Although the cut has been criticised for its modesty (5p per litre for 12 months).
The Employment Allowance for small businesses is set to increase to £5,000 from April 2022.
Those in the hospitality industry will benefit from a 50% business rates discount to take effect from April 2022.
The Future of Tax Policy?
In addition to these changes, Sunak also expressed his ambition to cut Income Tax down to 19% by the end of this parliament.
However, it should be noted that despite a commitment to lower Income Tax, increases elsewhere mean that the tax burden will increase overall.
This means it’s more important than ever for businesses to make the most out of any opportunities to reduce their tax liabilities.
Kind regards Ilyas