What has the Chancellor of the Exchequer delivered?
Everyone is concerned about the cost of living rises, those already upon us, and more worryingly, those to come.
Energy and fuel costs were already spiralling for businesses and householders even before the war in Ukraine. The full impact on this essential sector is yet to be realised. Fuel increases filter through to rising prices right across the board.
Spring Statement: Reduction of fuel duty of 5 pence per litre from 6 pm Wednesday 23rd March for 12 months.
Energy costs were set to rise to an unprecedented level from next month, with most households and businesses facing between 60% and 80% rise in prices. Although the UK is not overly reliant on Russian supplied gas, it has nevertheless shown that not only are we at the whim of global energy pricing; we are also vulnerable to global energy supply. The faster we can become self-sufficient through largely renewable sources, the better. As someone so neatly put it – “They can’t cut off the wind”.
Spring Statement: VAT on energy efficiency measures that were not already zero rated (e.g. solar panels and insulation) will now be cut from 5% VAT to zero VAT. This is not so much a fiscal U-turn, as an allowable reform following Brexit.
The levy on National Insurance contributions is set to rise from the new tax year, a move that has come under criticism from many, especially given the hike in inflation (currently 6.2% and expected to hit an unprecedented average high of 7.4% this year, according to the Office for Budget Responsibility [OBR]). The NI increases were seen as disproportionately hitting low-income workers hardest.
Spring statement: No change to the proposed increases in the NI levy. However, the threshold at which workers start to pay NI will be brought in line with income tax.
The NI threshold will rise by £3,000 to £12,570 from July 2022.
There wasn’t much mention of anything directly affecting business other than as the above applies to individuals. However, this summer, we can expect announcements as decisions are made to encourage business investment and, particularly, innovation. Expect a reform to the R&D tax credits thresholds and possible reforms to the tax treatment of capital investment.
Other matters:
Business rates: A 50% reduction in business rates for certain types of business, including some retail and hospitality, from April.
Household Support Fund: A 100% increase in funds paid to local authorities to support low-income families in their areas.
Small Business Employment Allowance: Increasing to £5,000 from April.
Big news to come…
Big news to come, expect a reduction in the basic rate of income tax of 1 penny to create a new basic rate of 19 pence per pound (19%), but not until 2024.
Rackhams Accountants are always happy to discuss the impacts of any fiscal changes on your business. Call us on 01482 631700.
