Chancellor Rishi Sunak presented his Spring Statement on Wednesday 23rd March 2022. Several measures were announced, including a cut in fuel duty for petrol and diesel as he sought to ease the impact of rising prices for households and businesses. The Chancellor will also lift the starting thresholds for National Insurance contributions (NICs) and pledged a cut to income tax in 2024. For businesses, there is an increase in the Employment Allowance, as well as relief from business rates on a range of green technologies and help with training and the adoption of digital technology.
Here we look at some of the most important talking points and what they mean for your business and personal finances.
Temporary Increases in National Insurance Rates
From April 2022, there will be a temporary increase in the rates of National Insurance contributions (NIC) payable for employees, employers and the self-employed as a transitional provision in readiness for the introduction of the Health and Social Care Levy from April 2023.
With the increase to the thresholds announced in the Spring Statement, from 6 July 2022 employees earning between £242 (£190 from 6 April to 5 July 2022) and £967 per week will pay National Insurance contributions at 13.25%. Earnings over £967 will attract a 3.25% charge. Employers will pay 15.05% on their employees’ earnings over £175 per week.
Fuel duty for petrol and diesel is being reduced by 5 pence per litre across the UK to assist all motorists – individuals, small businesses, and hauliers. This is only the second time the duty has been cut in 20 years, and the Chancellor says it’s the biggest ever cut for all fuel duty rates. This measure went into effect at 6 p.m. on March 23rd 2022 and will last for a year.
Increased Employment Allowance
In the Spring Statement, the Chancellor announced an increase from April 2022 of £1,000 for eligible employers to reduce their employer National Insurance contributions by up to £5,000 per year. The allowance can be claimed against only one PAYE scheme, even if the business runs multiple schemes. Connected businesses, such as companies under the control of the same person or persons, are only entitled to one Employment Allowance between them.
Green Reliefs for Business Rates
The government is introducing targeted business rates exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, with a 100% relief for eligible low-carbon heat network’s own rate bills. These measures will now take effect from April 2022, a year earlier than previously planned.
Making Tax Digital for Business: VAT
The final phase of the Making Tax Digital (MTD) for VAT regime is set to begin in April 2022. Making Tax Digital for VAT will apply to all VAT-registered businesses, regardless of turnover, beginning with their first VAT return period on or after April 1, 2022.
Corporation Tax Rates
The main rate of corporation tax (CT) is 19% for the Financial Year (FY) beginning 1 April 2022. This rate will increase to 25% for the FY beginning on 1 April 2023.
A small profits rate will be introduced for qualifying companies with no associated companies in the accounting period and profits of £50,000 or less so that they will continue to pay corporation tax at 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective corporate tax rate.
National Living Wage and National Minimum Wage
Following the recommendations of the independent Low Pay Commission, the government will increase the National Living Wage (NLW) for individuals aged 23 and over by 6.6% from 1 April 2022. The government has also accepted the recommendations for the other National Minimum Wage (NMW) rates to be increased.
From 1 April 2022, the hourly rates of NLW and NMW will be:
- £9.50 for those 23 years old and over
- £9.18 for 21-22 year olds
- £6.83 for 18-20 year olds
- £4.81 for 16-17 year olds
- £4.81 apprentice rate for apprentices under 19, and those 19 and over in their first year of apprenticeship.
Capital Gains Tax Rates
The current rates of Capital Gains Tax (CGT) are 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains; mainly chargeable gains on residential properties except for any element that qualifies for private residence relief.
The nil rate band has remained at £325,000 since April 2009 and is set to remain frozen at this amount until April 2026. The residence nil rate band (RNRB) was introduced in 2017, meaning that the family home can be passed more easily to direct descendants on death.
The rate of the residence nil rate band is £175,000 for 2022/23. There are several conditions that must be met to obtain the residence nil rate band.
A reduced rate of inheritance tax (IHT) applies where broadly 10% or more of a deceased’s net estate (after deducting inheritance tax exemptions, reliefs and the nil rate band) is left to charity. In those cases, the 40% rate will be reduced to 36%.
Contact Hysons, Charted Accountants, to Understand the Impacts on You
The response to the Chancellor's Spring Statement has highlighted that there are some tough times ahead due to the crises in the costs of both living and doing business, it can be difficult to determine what is and isn't relevant to you and your business.
Hysons, Chartered Accountants, has provided a wide range of accounting services to individuals, charities, and businesses. Our skilled team can assist you in answering any questions you may have about the impact of the Spring Budget and how to maintain financial stability. Contact our knowledgeable team of accountants and let us help you make sense of it all.