The Chancellor’s Spring Statement has attracted a mixed reaction, with some tax changes going ahead, some promised later and a hoped for move on VAT in the hospitality sector not appearing.
Against a troubled backdrop of rising inflation, (prices rose by 6.2 per cent in the 12 months to February, up from 5.5 per cent in January) and war in Europe, he raised the threshold on National Insurance contributions, promised to cut the basic rate of income tax to 19p in the pound in 2024 and lopped 5p of the cost of litre of fuel.
The Federation of Small Businesses (FSB) said that it was pleased to see the Chancellor adopt its recommendation of uprating the Employment Allowance to help small firms.
The Chancellor also increased the threshold for National Insurance (NI) contributions by £3,000 from July. This means employees won’t pay income tax or NI until they’re earning £12,570. This may help mitigate the impact of the 1.25 percentage point increase in the tax rate on individuals but not for employers.
Changes to National Insurance
There had been hopes that the planned increase of 1.25 percentage points in April would be axed or delayed, but the Chancellor confirmed the rise would go ahead to fund increased spending on health and social care.
From April 2023 onwards, the Nl rates will revert to 2021 to 2022 levels and a new 1.25 per cent Health and Social Care Levy will be introduced, where the revenue will be ringfenced to support UK health and social care bodies.
What about VAT?
There was no change to the headline VAT rate of 20 per cent but the hospitality and leisure industry had been hoping the temporary 12.5 per cent rate would be extended. Personal tax-free allowance
The UK-wide tax-free personal allowance remains at £12,570 for the 2022-23 tax year starting on 6 April. In the Budget of March last year the Chancellor announced that it will be frozen at this level until 2026.
This measure increases the maximum Employment Allowance by £1,000 from £4,000 to £5,000 from 6 April 2022.
This means eligible businesses, charities and community amateur sports clubs will be able to claim a greater reduction on their secondary Class 1 NICs and from the 2023 to 2024 tax year onwards their Health and Social Care Levy liabilities (secondary Class 1 NICs element).
Martin McTague, National Chair of the FSB, said: 'We originally put forward the Employment Allowance as a targeted measure to help small firms, and it has now been expanded three times since its creation. Together with a cut to fuel duty, these measures will provide crucial breathing space for our embattled small employers.”
State Pension to rise The State Pension will rise by 3.1 per cent from April 2022, as confirmed in the Autumn 2021 Budget. From April 2022 those qualifying for a full new State Pension will receive £185.15 a week (up from £179.60). And those who reached State Pension age before April 2016, who are on the older basic State Pension, will now receive £141.85 – up from £137.60.
National Living Wages increases
These rates are for the National Living Wage (for those aged 23 and over) and the National Minimum Wage (for those of at least school leaving age). The rates change on 1 April every year.
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