2022 Spring Statement Report

The economy and headline figures

The Chancellor presented the 2022 Spring Statement on 23 March 2022. You can read the actual 2022 Spring statement here or the main details are below.

The announcement of the 2022 Spring Statement followed the OBR reporting ‘the biggest hit to household finances since records began.  With domestic interest rates already at a 30 year high, inflation at 6.2% the Chancellor set out a ‘three-part plan’. The plan aims to strengthen the economy over the remainder of the Parliament.

The first part of the Plan was for immediate tax cuts. Also, measures to help families with increasing energy bills coming next month following the increase to the energy ‘price cap’. The second part confirmed the introduction of measures intended to promote growth and productivity within the economy. The third part confirmed future tax cuts intended to increase the amount of money people have to spend.

Tax Measures

Fuel Duty

The main 2022 Spring Statement ‘headliner’ was the cut in fuel duty. There is a temporary 12-month reduction to duty on petrol and diesel of 5p per litre. Representing a tax cut of around £2.4 billion over the next year. The RAC said that this cut would reduce the cost of filling up a typical family car by around £3. Although welcome, ‘will only take prices back to where they were just over a week ago’.

National Insurance Contributions

There were many calls to scrap the NIC/NHS levy due to come in next month. The Chancellor decided instead to increase the NIC Primary Threshold and Lower Profits Limit from £9,880 to £12,570. To align with the single personal allowance. This measure will come in for the July payroll run. The planned 1.25 percentage point increase in NIC for health and social care still going ahead. So the Chancellor will be receiving two months of increased NIC receipts. The delay is to give payroll software providers the time to accommodate the change into their systems.

The realignment of the NIC and the tax starting point is a long overdue measure. But the personal allowance has remained the same for two years now. Also, it will remain for another three years which will result in more tax receipts as wages increase.

The Chancellor did not leave out the self employed. From April 2022, the Lower Profit Limit will increase to align with the personal allowance. Self-employed individuals with profits between £6,725 and £12,570 will not pay Class 2 NIC. Although the year will still count towards state benefits such as the state pension. For the year 2022/23 the Lower Profit Limit will be £11,908. This comprises of the pre-July weekly Primary Threshold of £190 and the new, post-July threshold of £242.

Employment Allowance

The Employer’s NIC Secondary Threshold will remain at the same level. However, the Employment Allowance will increase to £5,000 from £4,000 from April 2022. As a result, this will benefit ‘around half a million businesses with a tax cut worth up to £1,000 each’. However, the measure will not benefit the many SME directors who withdraw a small salary with the balance as dividends. That’s because the Employers Allowance is not available to certain companies. Such as those with only one employee (who is a director) earning above the Secondary Threshold .

Capital investment

R&D tax relief

In the 2021 Autumn Budget he announced a reform of the system to claim Research and Development (R&D) relief. He confirmed in this Spring Statement; meanwhile, all cloud computing costs associated with R&D, including storage, will now qualify for tax relief as from April 2023. He also announced the expansion of the definition of R&D for tax reliefs to include pure mathematics. The intention, is to include support for investment by companies that work with artificial intelligence, quantum computing and robotics.

Capital Allowances

From April 2021 to March 2023 the ‘super-deduction’ enables companies investing in qualifying new plant and machinery assets to claim:

• a 130% super-deduction capital allowance on qualifying plant and machinery investments
• a 50% first-year allowance for qualifying special rate assets

This relief is to cease in a year’s time so they will be looking at ‘fixing that’ in the Autumn 2022 Budget.

Energy saving measures

The Chancellor is still looking to the future of energy saving measures. By extending the 0% VAT relief available for installing equipment in people’s homes for the next five years. Such as as heat pumps, solar panels and insulation. ‘A typical family having roof top solar panels installed will save more than £1,000 in total on installation. Then £300 annually on their energy bills‘. They will also remove complex eligibility conditions for this relief. Making the measure available to more households. However, not every ‘typical family’ will be able to afford to install these alternative energy sources.

Other 2022 Spring Statement measures

Household support fund

The Chancellor confirmed that he would double the amount made available to the Household Support Funds operated by local Councils. This fund provides short-term financial support to vulnerable households struggling to afford household essentials.

Business rates relief and exemptions

It was announced that the business rates multiplier will be frozen in 2022-23. Also, the retail, hospitality and leisure industry will be allowed a 50% cut on business rates up to £110,000.

Further business rates measures included the introduction of targeted business rate exemptions from 1 April 2022 until 31 March 2035. This is for eligible plant and machinery used in onsite renewable energy generation and storage. Also, a 100% relief for eligible low-carbon heat networks with their own rates bill. This is to support the decarbonisation of non-domestic buildings.

Fraud

The Chancellor announced the creation of a new Public Sector Fraud Authority. This is to prevent fraud and ‘to tackle waste and inefficiency across the public sector’. The authority will work with the British Business Bank and the National Intelligence Service.

Apprenticeship levy

The take-up of the Apprenticeship Levy has been disappointing. Following calls from employers’ representatives for a more flexible scheme, the Chancellor announced a review of the current scheme. The review aims to improve methods to encourage employers to invest in adult training.

The future

Above all, the Chancellor reaffirmed his promise that by 2024 the basic rate of tax will reduce by 1%. However, the hope is that the economy is in a stable enough position to make that promise a reality.

If you have any questions about how the Spring Statement 2022 affects your taxes, please get in touch.