Although the Spring Statement is typically an update on the outlook for the UK economy rather than a full-blown Budget, the Chancellor’s speech will be pertinent for the small business community for several reasons.
Amid the backdrop of the rising inflation and the crisis in Ukraine, Sunak is likely to address the rising cost of energy and fuel costs that have hit small firms hard in recent months.
The Office for Budget Responsibility (OBR) will publish its economic and fiscal forecast ahead of the Spring Statement 2022. The forecast will outline the picture for spending, GDP, national debt, unemployment and wages. All of which should help to inform the Chancellor’s immediate plans to deal with the escalating costs incurred by employers and employees alike.
What options are open to the Chancellor in the Spring Statement 2022?
The Chancellor has already committed to providing £350 to many homes across the UK, with a £200 rebate planned for the autumn and a £150 council tax rebate in April for eligible households. However, it’s possible that he could go further still with the price of wholesale gas and oil escalating by the day, hitting small business owners just as hard.
A windfall tax on energy companies and the suspension of green and social levies have been mooted and could be on the agenda.
In terms of taxation, Mr Sunak may look to introduce a windfall tax on energy companies and the suspension of green and social levies have been mooted and could be on the agenda.
A rise in National Insurance Contributions (NICs) is currently due to start in April. NICs on earnings between £9,568 and £50,268 will rise by 1.25 percentage points, with an employee’s typical rate rising to 13.25%. In addition, rates on earnings beyond £50,268 will rise from 2% to 3.25%.
NIC rates for employers and the self-employed are also set to rise too, contributing to the continued squeeze on prices.
The rise in NICs is ring-fenced for investment in health and social care post-pandemic. Although some have called for this rise to be postponed, the Chancellor may be loathed to starve the NHS of essential funding.
Increased dividend tax rates will also apply from April 2022 as follows:
- 8.75% for basic rate taxpayers (previously 7.5%)
- 33.75% for higher rate taxpayers (previously 32.5%)
- 39.35 % for additional rate taxpayers (previously 38.1%)
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Date published 9 Mar 2022