The Spring Statement 2022

March 23, 2022

As many of us are aware, the cost of living has been rising. Inflation is now at 6.2% and expected to get worse as the year goes on. The forecast for inflation is estimated to hit an average of 7.4%. This means that prices will continue to rise by about 1.2% more than what they are currently at during the time the Spring Statement has been released.

With that in mind, here's what you need to know about the changes announced in the Spring Statement.

Fuel, energy and living costs:

Fuel duty will be cut by 5p per litre. Fuel duty is a type of tax that makes up a part of the price you pay when buying petrol, diesels and other fuels. Since this is being reduced by 5p per litre there will be a slight decrease in the amount that you have to pay for your fuel. This will remain in place until March 2023.

Energy efficiency materials such as heat pumps, insulation or solar panels will be zero rated for VAT. This will also reduce the total amount that you need to pay for these types of materials and equipment. This will be in place for the next 5 years.

Local authorities will get an additional £500 million for the Household Support Fund which will create a £1 billion fund intended to help vulnerable households with the rising living costs.

Taxation:

The National Insurance increase that was announced last year in October will still be going ahead. However, the threshold for what people must earn per year before paying NI will be increased by £3,000 as of July. This makes the threshold £12,570 per year which means that if you earn below £12,570 you will not have to pay NI. This is the same threshold at which income tax begins to be payed at.

The Employment Allowance will increase from £4,000 to £5,000 from April onwards. This is allowance reduces how much the employer has to pay in National Insurance. This applies to the entire business not individual employees. So it is an allowance of £5,000 for each tax year for your entire business/company. For example, you have to pay £5,500 in National Insurance in total for the tax year, you’ll only need to pay the additional £500 as that is the amount that is left over after the £5,000 Employment Allowance is used up.

You are eligible to claim this if:

  • You are registered as an employer. Or are a sole trader/limited company/partnership with employees.
  • If you have a limited company that employs only directors and two or more directors earn more than the secondary threshold for Class 1 National Insurance contributions.
  • If employers’ Class 1 National Insurance liabilities were less than £100,000 last tax year.

Please keep in mind that companies with only one employee cannot claim this allowance.

Other changes have been mentioned as something the The Chancellor is committed to working on in the future but there is nothing else significant that will be taking effect this year.

Sources:

Chancellor announces tax cuts to support families with cost of living - GOV.UK (www.gov.uk)

Spring Statement: Key points at a glance - BBC News

How Rishi Sunak's Spring Statement will affect you - BBC News

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