Among the measures announced were cutting fuel duty by 5p per litre from 6pm on 23rd March, raising the national insurance threshold to £12,570 and increasing the employment allowance to £5,000, which equates to a £1,000 tax cut for approximately half-a-million small businesses, commencing in just two weeks.
Below, we explore the headlines from the Spring Statement 2022 most relevant to the UK's business community.
National Insurance thresholds equalised with income tax
The National Insurance threshold increase was the big surprise announcement in this Spring Statement. The Chancellor announced that the National Insurance Primary Threshold and Lower Profits Limit, for employees and for the self-employed, will increase from £9,880 to £12,570 from July 2022.
For more details of what this means for employees, limited company directors and the self-employed, please click here.
Increase to Employment Allowance
From April 2022, the Employment Allowance will rise from £4,000 to £5,000. For more details of this increase, please see click here.
Fuel duty cut by 5p per litre
In only the second time in 20 years, and as widely anticipated in the press prior to the Spring Statement, the Chancellor announced a 5p per litre cut in the duty on petrol and diesel.
This will take effect from 6pm on 23rd March and is expected to be in place for the forthcoming 12 months.
The cut is anticipated to save households and businesses around £2.4bn in 2022/23, with the average car driver saving £100, van driver £200 and haulier £1,500.
Reduction in the basic rate of income tax from 2024
In another unexpected move in the Spring Statement, the Chancellor announced that the basic rate of tax would reduce from 20% to 19%, from April 2024, providing certain public spending and budget plans are met.
The basic rate of income tax was last reduced in 2008/09 when it fell from 22% to 20%. The reduction was however accompanied by the end of the 10% starting rate of income tax for the first £2,230 of income.
This 1p cut in income tax will not affect Scottish taxpayers because tax rates are devolved and a starter rate of 19p already applies.
Research and Development tax relief
Following the announcement in the November 2021 Budget that R & D tax relief would be reformed to exclude work carried out overseas on behalf of UK companies, there appears to be some relaxation in the Spring Statement.
It seems some overseas costs will be eligible for relief. It is anticipated the easing will take into account material factors such as geography, environment, population or other conditions which aren’t present in the UK and where regulatory or other legal requirements mean that activities need to take place outside the UK.
The Government plans to legislate ready for implementation from April 2023.
Encouraging business investment
Ahead of April 2023, the Government will be considering reforms to support future business investment, recognising that this is a weakness in the UK and has resulted in lower productivity.
The Government has confirmed that its priority is to ensure that any future support beyond the super-deduction aligns with ensuring tax spending is effectively targeted to support economic growth and to ensure the UK remains a competitive place to invest.
Business rates discounts
In the Autumn Budget in 2021, the Government announced a targeted business rate exemption from April 2023 for businesses making green technology including solar panels and heat pumps, and also full relief for eligible low carbon networks which have their own rates bill.
This relief has now been accelerated to April 2022 and is anticipated to save businesses £35m in 2022/23 and £170m over the next five years to support the Government's decarbonisation plans for buildings.
Although a business rates reduction of 50% was mentioned by the Chancellor in the Spring Statement for Retail, Hospitality and Leisure businesses with rates bills of up to £110,000 this was previously announced in the Autumn Budget 2021 so confirmation of this came as no surprise.
Business rates are England only and the devolved administrations will receive Barnett consequential funding in the usual way.
VAT on energy saving materials
To encourage households to improve energy efficiency and keep their energy costs down, a new 0% VAT rate will be introduced for the installation of energy saving materials, such as solar panels and insulation. The new rate will apply to domestic installations that take place in the UK (but not Northern Ireland) between 1st April 2022 until 31st March 2027, and will replace the current 5% rate. Complex eligibility conditions for this relief will also be removed, making it available to more households than before.
Date published 8 Mar 2022 | Last updated 24 Mar 2022This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.