HomeTaxThe Spring Statement – a round-up for accountants

The Spring Statement – a round-up for accountants

Chancellor Rishi Sunak has promised the biggest cut to the basic rate of income tax in more than 16 years in the eagerly anticipated Spring Statement – but not until 2024, when the rate will fall from 20p to 19p in the pound.

In his Spring Statement, the Chancellor outlined the threats facing the UK’s economy, including Russia’s invasion of Ukraine, which he said posed “a risk to our recovery”.

He said other factors putting pressure on the economy include inflation, which is set to hit 7.4% by the end of 2022, and interest on debt, which is set to cost the UK £83bn in the next year.

The cut to income tax – which personal finance guru Martin Lewis described as an “electoral promise for the future” – was the headline announcement in Sunak’s ‘mini-Budget’.

However, the Chancellor unveiled a number of measures aimed to help people and businesses combat the cost of living crisis.

At a glance, these include:

• A £3,000 rise in the National Insurance threshold to £12,570 from July 2022, putting it in line with the threshold for income tax. Sunak said: “That’s a £6bn personal tax cut for 30 million people across the United Kingdom. A tax cut for employees worth over £330 a year.” The Chancellor explained this is the “largest increase in a basic rate threshold ever, and the largest single personal tax cut in a decade.”

• Fuel duty cut by 5p per litre, with the lower rate to be in place for 12 months, effective from 6pm on 23 March 2022.

• Businesses working in the retail, hospitality and leisure sectors will benefit from a 50% discount in business rates, up to £110,000.

• The Employment Allowance will increase to £5,000, which the Chancellor claims is “a tax cut worth up to £1,000 for half-a-million small businesses.” The new amount will come into place in the new tax year.

• Reform to the tax credits regime for research and development carried out by private companies. Sunak also said the government will cut tax rates on business investment, with details of both to be set out at the Budget in the autumn.

• A review of employment training in the private sector, including an assessment of the apprenticeship levy, which is a tax on the wage bills of major companies introduced in 2017 to pay for skills training.

Spring Statement welcomed but Chancellor could have done more

Commenting on the Spring Statement, CBI Director-General Tony Danker said: “The Chancellor has taken steps to sustain confidence in our economy. They are welcome but don’t do enough to tackle the current challenges facing firms.

“His new plan to incentivise business investment from next year is very good news. We stand ready to work with the Chancellor on measures essential to transforming productivity such as capital allowances, R&D reforms and a revised apprenticeship levy. These measures lie at the heart of U.K. competitiveness.”

Danker added: “In reality, we cannot wait until October to get growth going. The Government needs to get moving straight away.

“The Chancellor is right that the government can’t solve every challenge. However, the only enduring response to inflation, energy prices and cost of living challenges is a relentless campaign for economic growth.”

Further information can be found on the government website.

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