We’ve worked with a number of our partners to compile this summary of yesterday’s Spring Statement. In addition to this summary, a full analysis is available here.
Before we delve in, this summary isn’t financial advice and we’d recommend seeking advice before taking action. If you are a client of Emery Little, we will discuss the implications at your next review meeting. If you have any questions in the meantime, just get in touch.
The Spring Statement was not meant to be a March mini-Budget, despite what many headlines in the days before suggested. Rishi Sunak believes in the once-a-year approach to major tax and spending changes, unlike some of his predecessors. However, in 2022, as in 2020 and 2021, events conspired to put an end to that single Budget aspiration. Instead, on the day the inflation rate (CPI) was announced as having reached 6.2%, the Chancellor announced a range of tax cuts aimed at countering the cost of living crisis. You’ll find our full analysis here and our summary below.
- There will be a temporary 12-month cut to duty on petrol and diesel of 5p per litre from 23rd March 2022.
- The primary threshold for Class 1 national insurance contributions (NICs) will increase from £9,880 a year to £12,570 a year from 6th July 2022, bringing it in line with the frozen personal allowance.
- For company directors, who are subject to special rules, the equivalent annual amount from July will be £11,908. From 2023/24, all employees will share the same £12,570 annual threshold. The maximum potential Class 1 employee NICs saving in 2022/23 is £269.
- For the self-employed, the lower profits limit will increase from £9,880 to £11,908 in 2022/23, rising to £12,570 in 2023/24. Class 2 NICs will not be payable if profits are below these limits. The maximum potential Class 4 NICs saving in 2022/23 is £208.
- The employment allowance will be increased to £5,000 from April 2022.
At the end of his speech, in an unusual pre-Budget unveiling of a specific tax move, the Chancellor announced that the basic rate of income tax will be cut from 20% to 19% from April 2024 for taxpayers in England, Wales and Northern Ireland.
2022/23 Changes (and freezes) that have already been announced
Several tax and other changes (including freezes) will take effect from 6th April 2022. Most of these date back to the two Budgets of 2021.
- Income tax in the UK: The personal allowance for 2022/23 will remain at £12,570 and the basic rate band will similarly be frozen at £37,700 (outside Scotland), making the higher rate threshold (the sum of the two) an unchanged £50,270. These freezes represent a real-terms tax increase given the Bank of England forecasts that CPI inflation in April will be 8%.
- Dividend tax rates: These will increase by 1.25% from 2022/23, taking them to between 8.75% (basic) and 39.35% (additional rate).
- National insurance contributions: The secondary threshold for employer’s Class 1 NICs will increase by 3.3%, approximately in line with inflation to September 2021. The upper earnings limit (for employees) and upper profits limit (for the self-employed) will be frozen at £50,270.
- Pensions lifetime and annual allowances: The lifetime allowance, will remain at £1,073,100 for 2022/23 and is not due to rise until 2026/27. There’s no increase to the annual allowance which remains at £40,000, subject to the taper and money purchase allowance rules.
- Inheritance tax (IHT): The residence nil rate band and main nil rate band will remain at £175,000 and £325,000, with both set to stay frozen until 2026/27.
- Company car tax: Company car tax for vehicles registered since 6th April 2020, will rise in 2022/23 for all but the highest emission vehicles.
You can read the full analysis here and we’d like to remind you to make sure you get advice before taking action.