Spring Statement 2022
Chancellor unveils new Tax Plan in his 2022 Spring Statement including an unexpected cut in the basic rate of income tax in 2024.
Chancellor unveils new Tax Plan in his 2022 Spring Statement
On 23 March 2022 the Chancellor delivered his Spring Statement. In the lead up, it had been suggested that there would be few significant fiscal changes, nevertheless on the day a new ‘Tax Plan’ was unveiled setting out the Government’s plans for the remainder of this Parliament. This was relatively light on detail with a lot of decisions affecting businesses left until the autumn but there were some significant announcements aimed at tackling cost of living challenges for families. Notably, individuals’ National Insurance (NI) thresholds will rise and align with the Income Tax Personal Allowance so that going forward the first £12,570 earned by employees and the self-employed will be tax and NI free. In addition, the basic rate of income tax will reduce from 20 percent to 19 percent from April 2024 provided certain fiscal conditions are met (note that Scottish and Welsh taxpayers are subject to tax on non-savings and non-dividend income based on rates, and for Scottish taxpayers bands, set by their devolved parliament).
Sharon Baynham, Director, UK Tax Policy at KPMG in the UK, shared her initial thoughts on the day on LinkedIn. Jo Bateson, Private Client Tax Partner at KPMG in the UK, also shared her initial thoughts on the impact for individuals and in this edition of Tax Matters Digest you can read about proposals to boost business investment in capital and ideas by reforming capital allowances and research and development tax reliefs.
- From 6 April 2022 the Employment Allowance which allows eligible businesses to reduce their employer’s NIC bills each year will increase from £4,000 to £5,000;
- The previously announced exemption on business rates in England for green technology, including solar panels and heat pumps, has been brought forward to April 2022; and
- The Government will consider whether the current tax system, including the Apprenticeship Levy, does enough to incentivise businesses to invest in the right kinds of training.
- The Government stated that it wants to make “the tax system simpler, fairer and more efficient” and will look to further reform reliefs and allowances ahead of 2024. However, the Tax Plan, which covers the remainder of this Parliament, was silent on capital taxes with no comments on inheritance tax, capital gains tax or a wealth tax indicating a period of anticipated stability providing a more certain environment for making long term plans.
- Fuel duty on petrol and diesel has been cut by five pence per litre from 6pm on 23 March 2022 for 12 months; and
- VAT on the installation of certain Energy Saving Materials in residential accommodation has been reduced from 5 percent to 0 percent from 1 April 2022 to 31 March 2027.