On Wednesday 23rd March, Chancellor Rishi Sunak delivered his ‘mini-budget’ Spring Statement to Parliament.
With an emphasis on the cost-of-living crisis, the Chancellor said he would respond by building a stronger, more secure economy for the UK.
key points at a glance:
COST OF LIVING
- Fuel duty will be cut for only the second time in 20 years, by 5p a litre for the next 12 months.
- The current 5% VAT for households installing energy saving measures like solar panels, heat pumps and insulations will be cut to 0%
- The Chancellor pledged to double the government’s household support fund to £1bn.
INCOME TAX
- The basic rate of income tax will be cut from 20% to 19% in 2024.
- Considering the current economic uncertainties, the Chancellor said it would not be responsible to cut rates at the present time.
NATIONAL INSURANCE
- Despite calls to scrap or delay it, the plans for a 1.25% rise in National Insurance contributions (NIC) for Employees and Employers will go ahead from 6th April 2022.
- However, the threshold for Employees NIC will increase to £3,000 from July, putting it on equal footing with the personal income tax allowance of £12,570.
BUSINESSES
- Research and Development tax reliefs are to be extended.
- The employment allowance for small business will increase to £5,000 from the new tax year.
- Dividend rates of Income Tax are due to increase from April 2022. This measure increases the rates of Income Tax applicable to dividend income. Currently the ordinary rate, upper rate and additional rate are 7.5%, 32.5% and 38.1% respectively. The measure will increase each rate by 1.25% to 8.75% 33.75% and 39.35%.
ECONOMY
- Forecasts from the Office of Budget Responsibility showed the economy would grow by 3.8% this year.
- GDP is anticipated to grow by 1.8% next year, 2.1% in 2024, 1.8% in 20254 and 1.7% in 2026.