Below we have summarised the key highlights of the chancellor Rishi Sunak’s Spring Statement on 23rd March 2022, presented to the House against a backdrop of high inflation and a cost-of-living crisis.
- The economy grew by 7.5% in 2021 having shrunk 9.4% in 2020 as a result of the COVID-19 pandemic.
- Forecasts by Office for Budget Responsibility (OBR) estimate the British economy would grow by 3.8% this year. This, following the OBR’s forecast in October that growth figure of 6% for 2022.
- GDP forecasted to grow by 1.8% in 2023, 2.1% in 2024, 1.8% in 2025, and 1.7% in 2026.
Cost of living
- The chancellor announced that CPI reached 6.2% in February and said that the OBR forecasts that inflation would average 7.4% this year.
- Fuel duty on petrol and diesel will be cut by 5p a litre for 12 months, starting 23rd March 2022 at 6pm.
- VAT on ‘Energy Saving Materials’ (ESMs) is to be cut from 5% to 0% from 1 April 2022 until 31 March 2027. This applies to household ESMs such as solar panels, heat pumps and insulation.
- Sunak also said he would double the government’s household support fund to £1bn, which is designed to support vulnerable households.
- The planned National Insurance (NI) rise of 1.25% is to go ahead as planned, which is designed to help fund the NHS and social care. From April 2023, NI will return to its previous levels and will be supplemented by the Health & Social Levy, which we wrote about in September 2021.
- However, the threshold for NI is to rise from £9,880 to £12,570 from 6th July 2022 for those in employment (Class 1 Primary Threshold) and the self-employed (Lower Profits Limit). This aligns the threshold for National Insurance with the personal allowance for income tax.
- You will note that, unusually, the change comes into force partway through the tax year. It is thought that this will allow time for employers and payroll administrators to update their systems. Due to the part year change, the threshold is an annualised equivalent of £11,908 for the 2022-23 tax year.
- Mr Sunak announced that the Employment Allowance will increase from £4,000 to £5,000. This is available to employers with employer NIC liabilities of under £100,000 in the previous tax year.
- The Chancellor announced that he plans to reduce the basic rate of income tax from 20% to 19% by the end of this Government (April 2024). This applies to English, Welsh and Northern Irish taxpayers only, as Scotland sets its own tax rates.
Find Out More
You can find further information on the gov.uk website here.
by Sam Brueton, Director of HCL Bank House Financial Services Ltd
Published on 25/03/2022