Spring Statement 2022
Chancellor Rishi Sunak announced his Spring Statement in the Commons today (Wednesday 23rd March).
There have been calls for the Chancellor to scrap the health and social care levy, over the past few months, in response to the cost of living squeeze. Pressure was also being applied to introduce a fuel duty cut, as fuel prices reach an all time high.
Sunak announced the publishing of a ‘tax plan’ that sees the government takes a ‘principled approach to cutting taxes’. This will help them achieve their ‘overarching ambition to reduce tax.’
Key Changes
Income Tax
Sunak announced a 1% cut in the basic rate of income tax, before the end of Parliament in 2024. This will take the basic rate down from 20% to 19%. It is said to be a £5bn tax cut for 30 million people.
National Insurance
The planned 1.25% increase in national insurance will go ahead in April, in order to raise funds for health and social care. However, the National Insurance threshold will increase by £3,000 which takes the new NI threshold to £12,570 in line with income tax. The increase to the NI threshold will take effect from July this year.
Fuel Duty
As fuel prices continue to soar, the Chancellor has announced a fuel duty cut by 5p a litre, until March 2023. This comes as the average price of a litre of petrol at UK forecourts reached a record high. The 5p fuel duty cut comes into effect from 6pm this evening.
VAT
Sunak announced that for the next five years, homeowners installing solar panels, heat pumps or insulation will no longer pay 5% VAT, they will pay zero.
R&D Tax Relief
The Chancellor discussed his intentions to reform R&D tax relief and noted that ‘clearly it is not working as well as it should’ for SMEs.
Sunak confirmed that the government will reform R&D tax credits so ‘they’re effective and better value for money.’ The reform will reportedly ‘expand the generosity of the release to include data cloud computing and pure maths. And we’ll consider in the Autumn whether to make R&D expenditure credit more generous.’
