The Chancellor of the Exchequer, Rishi Sunak, has announced measures in the Spring Statement on 23 March 2022 to strengthen our economy to remain secure. Recovery from the pandemic, the Ukraine crisis and rising cost of living are very much on everyone’s minds. The sanctions imposed on Russia in response to their invasion of Ukraine are not cost free and do not come without risk to our economy. We are already experiencing the impact on global supply chains. As of this morning it was announced that inflation rose to 6.2%, similar levels to Europe and lower than the US, and the OBR predicts that inflation will rise to 7.4% this year.
To help with the rising cost of living, the Chancellor has announced three immediate measures:
1. Motorists and cost of living. Fuel duty will be cut by 5p per litre for 12 months until March 2023. Effective from 6pm today 23 March 2022.
2. Energy efficiency. Over next 5 years, 0% VAT on solar panels, heat pumps and other energy saving insulation methods installed on homes.
3. Household Support Fund doubled to £1bn, to be distributed through Local Authorities.
A new tax plan has been unveiled:
– The health and social care levy of 1.25% will remain
– National Insurance threshold raised by £3,000, effective from July, taking new threshold to £12,570. This means that earnings up to £12,570 will not pay a penny in tax or National Insurance.
– Personal tax threshold raised by £3,000
– Basic rate of income tax will be cut from 20% to 19% in 2024
– Employment Allowance for businesses will increase from £4,000 to £5,000 in April
– Exemption on business rates for green technology including solar panels and heat pumps. Green technology will be exempt from business rates from April 2022 and reducing the VAT on energy savings materials (ESM) from 5% to 0%
– Reforming R&D: From April 2023, business will be able to claim relief on the storage of their vital data and pure maths research
– The existing Business Support package includes:
- From April 1, and as announced in Autumn Budget 2021, retail and hospitality receive a 50% business rates discount up to £110,000.
- Freezing the business rates multiplier for another year
- Introducing the temporary super-deduction i.e. for every pound a company invests, their taxes are cut by up to 25p
- Increasing the Annual Investment Allowance to £1 million
- Extending the transitional relief for business rates and supporting small business schemes for 2022-23, which will restrict bill increases from between 15% to 25% for SMEs. The extension of these is expected to protect small businesses from significant bill increases before the 2023 revaluation.
- Establishing Help to Grow, which is giving SMEs the tools they need to innovate, grow, and help drive our economic recovery.
- Further tax cuts on business investment and innovation will be announced in the Autumn budget.