Spring is a busy time in the financial calendar. Along with the start of a new tax year, there is also the Chancellor’s annual Spring Statement.
Not to be confused with the Budget, a Chancellor’s Statement is a chance for the Government to summarise the state of the UK economy and announce upcoming changes.
This year’s statement was delivered to parliament on 23 March by Chancellor Rishi Sunak.
With inflation running high and the Russian invasion of Ukraine likely to increase the cost of living even further, Sunak made several new measures to try and ease the burden on taxpayers.
Here are the main points and what they mean for you.
Changes to national insurance
One of the biggest announcements was the raising of the National Insurance threshold from £9,880 to £12,570.
That means that from July 2022, you will not have to pay national insurance contributions if you earn less than £12,570 a year.
This new threshold is the same as the income tax threshold, making it easier to work out what you owe. Both thresholds will be frozen until April 2026, rather than rising with inflation as they usually do.
These measures partially offset the 1.25% uplift in National Insurance payments from this April.
According to the Government the new threshold means 70% of workers will end up paying less tax, even when you take the levy into account.
The Chancellor also announced a reduction in Class 2 national insurance contributions for the self-employed.
At present, anyone earning more than £6,515 a year is charged at a flat rate of £3.05 a week. From April, this will be reduced to zero for those earning less than £9,568.
Temporary reduction in fuel duty
Another big announcement was that fuel duty would be cut by 5p per litre for the next 12 months.
This came into effect immediately and marks the biggest ever reduction of fuel duty in the UK. The Government estimates that motorists will save an average of £100 a year, and van drivers will save £200.
From April 2024, the basic rate of income tax will be reduced from 20% to 19%.
While this is far off, the Government said as many as 30 million people stand to save an average of £175 a year.
However, the Resolution Foundation estimates seven in eight workers will pay more in taxes considering all changes to taxes and thresholds.
The employment allowance will increase in April 2022 from £4,000 to £5,000.
Eligible businesses can use the employment allowance to reduce their annual national insurance payments by up to an extra £1,000.
The Government says this will take 50,000 businesses out of paying NICs on employment altogether.
VAT on energy-saving materials
VAT on energy saving materials will be reduced from 5% to 0% for the next five years. Examples of eligible materials include solar panels and wind turbines.
If you’re planning on investing in this area, it could be worth your while to do so sooner rather than later.
The start of a new tax year is the perfect time to put your finances in order. If you’re unsure about anything, we’re here to help. Get in touch today to make an appointment.