Chancellor Rishi Sunak made his 2022 Spring Statement on 23 March 2023. Headline grabbers were a cut in the National Insurance threshold for employees, a future cut in Income Tax and another freeze on fuel duty.
The chancellor has announced an increase in the employee and self employed National Insurance contribution (NICs) thresholds for this coming tax year. These changes are welcome for lower paid earners although they do not apply until July. This change does not apply to the Employer's secondary threshold but many small employers will benefit from a rise in the Employer's NICs allowance. It's the stuff of 'smoke and mirrors' continues to add new levels of complexity for small business owners struggling with the tax rules.
Larger business are singled out for special financial assistance under the chancellor's proposals for acceleration of some already set out new business rates reliefs. Further changes are planned, and there is a rates discount for business in retail, hospitality and leisure. We are still waiting to hear what is planned for an online sales tax, a consultation is on-going on that front.
Households who are planning to invest in domestic energy savings products will welcome the drop in the VAT rate from 5% to 0% for these products, although with inflation running at higher rates than the currently forcast 7.4% for all building products they might not be so inclined to part with their cash just now.
Further measures and links to more detail are below.
Income Tax and NICs
Income Tax
From April 2024
- The basic rate of Income Tax will decrease from 20% to 19%.
- There will be a three-year transition period for Gift Aid relief.
- This will maintain the 20% rate of relief for charities until April 2027.
- The 1% reduction will not apply to non-savings, non-dividend income received by Scottish taxpayers as that rate is set by the Scottish Government.
National Insurance Contributions (NICs)
Employers
From 6 April 2022
- The maximum Employment Allowance available to employers will increase to £5,000 from £4,000.
Employees
From 6 July 2022
- The Primary Threshold (above which employees pay Class 1 NICs) will increase from £9,880 to £12,570.
Self-employed
-
From April 2022
- No Class 2 NICs will be payable where self-employment profits fall between the Small Profits Threshold (£6,725) and the Lower Profits Limit.
- No Class 2 NICs will be payable where self-employment profits fall between the Small Profits Threshold (£6,725) and the Lower Profits Limit.
-
From 6 July 2022
- The Lower Profits Limit (above which the self-employed pay Class 4 NICs) will increase from £9,880 to £12,570 annually.
- The Lower Profits Limit will remain aligned with the personal allowance at £12,570 to 2025-26.
See Spring Statement: Income Tax & National Insurance for tables and further detail.
Companies: Research & Development (R&D) tax reliefs
From April 2023
Legislation will be published in draft for inclusion in a future Finance Bill to ensure that:
- Where it is necessary for the R&D to take place overseas for regulatory reasons, expenditure on certain overseas R&D activities will be able to qualify relief.
- The definition of R&D for tax reliefs will be expanded by clarifying that pure mathematics is a qualifying cost.
- There will be a continuing review of R&D relief to ensure that it is targeted as planned.
See Spring Statement: Research & Development (R & D) tax reliefs
Capital Allowances
- Extending the £1 million Annual Investment Allowance (AIA) to 31 March 2023.
- Reiterating that the 'Help to Grow: Digital' discount for approved software is still available.
The Government is considering further options ahead of the Budget.
See Spring Statement 2022: Capital Allowances
VAT
VAT penalties
- As already announced, there is a delay in the implementation of the new penalty reform by nine months to January 2023.
VAT: Installation of Energy-Saving Materials
From 1 April 2022:
- There will be a widening of the relief available for the domestic installation of qualifying Energy-Saving Materials (ESMs) e.g. thermal insulation and solar panels.
- The list of qualifying ESMs will be expanded to include additional technologies, including wind and water turbines, which had previously been made outside of the scope of VAT.
- Qualifying installations will be zero-rated instead of the current reduced rate of 5%.
- This will be time-limited from 1 April 2022 until 31 March 2027, when the 5% rate will be reintroduced.
- These changes cannot be applied in Northern Ireland as it is still bound by EU rulings. The Northern Ireland Executive will receive a Barnett share of the value of the relief instead.
See Spring Statement 2022 VAT for more detail
Training
- Help to Grow: Management offers businesses 12 weeks of leadership training through the UK’s top business schools, with the government covering 90% of the cost.
- The cost of apprenticeship training is 95% subsidised for SMEs that do not pay the Apprenticeship Levy.
- Help to Grow: Digital, offering eligible SMEs a 50% discount on approved software worth up to £5,000
Business Rates
- Targeted business rates exemptions, which have already been proposed under the governments 'fundamental review' of business, will now apply a year early from April 2022. These will give up to 100% relief to:
- Businesses on the cost of eligible plant and machinery used in onsite renewable energy generation and storage.
- Eligible low-carbon heat networks with their own rates bill.
- The business rates multiplier will be also be frozen in 2022-23.
- Eligible retail, hospitality, and leisure businesses will also benefit from a new temporary 50% Business Rates Relief
See Business Rates: What's new? (subscriber guide)
Fuel duty
- Reduction in the rate of Fuel Duty by 5p from 6pm, 23 March 2022.
- The reduction will be for a period of 12 months.
- The 5p reduction applies to diesel, leaded and unleaded petrol. Other fuel rates will be reduced by a proportionate percentage where practical.
- See HMT: Temporary cut to fuel duty
Anti-Fraud
- £48.8 million of funding over three years to support the creation of a new Public Sector Fraud Authority and enhance counter-fraud work across the British Business Bank and the National Intelligence Service.
- Department of Work and Pensions: additional £510 million to increase DWP’s capacity and capability to prevent and detect fraud and error, and collect more debt.
- Tax credits: £12 million to help claimants keep their tax credits claims accurate through regular health-check calls, compliance activity, and the use of SMS nudges to help prevent or correct error and fraud and support a smooth transition to Universal Credit.
See Spring Statement 2022: Fraud Protection
Debt Management
- The Chancellor made a ‘Debt management report’ to fulfil the annual requirement in accordance with the ‘Charter for Budget Responsibility’. Government borrowing has now reached the highest levels ever seen in modern times.
- The report found that public sector net borrowing (PSNB) in 2021-22 is expected to be £127.8 billion, lower than forecast in October 2021. On the other hand, In 2022-23, higher debt interest payments due to inflation more than offset higher receipts and mean borrowing is higher than forecast in October 2021.
See Spring Statement 2022: Debt Management
External Links
Spring Statement 2022: documents
If you like our content come and join us.
Thousands of accountants and advisers and their clients use www.rossmartin.co.uk as their primary TAX resource.
Register with us now to receive our receive our FREE SME Topical Tax Update & newletter