The Chancellor made his annual Spring Statement speech on 23 March 2022 where he set out the Government’s tax plan to support the UK economy, businesses and families in both the short and the medium term.
Key measures the Chancellor announced as part of the plan include:
Income tax cut
The Chancellor announced long-term plans to cut the basic rate of income tax from 20% to 19% in 2024. This will apply to employment income and non-savings, non-dividend income for taxpayers in England, Wales, and Northern Ireland. Rishi Sunak also claimed that in 2024-25, taxpayers will have an extra £175 in their take home pay annually
The Chancellor announced that the Primary Threshold and Lower Profits Limit will both increase from £9,880 to £12,570. This aligns the thresholds with the personal allowance and applies to class 1, class 4 and secondary class 1, 1A and 1B.
The tax-free dividend allowance is unchanged at £2,000. The dividend tax rates are increased by 1.25% for each category of taxpayers for 2022/23.
Fuel duty has been cut by 5p per litre for 12 months from 6pm on 23 March 2022.
The employment allowance increases by £1,000 from £4,000 to £5,000. This increase applies from April 2022. The allowance continues to be limited to employers with an employer NIC bill below £100,000 in the previous tax year.
With effect from 6 April 2028, the earliest age at which most pension savers can access their pensions without incurring an unauthorised payments tax charge will increase from 55 to 57.
Recovery Loan Scheme
The Recovery Loan Scheme is extended six months until 30 June 2022 for small and medium sized enterprises and from 1 January 2022 capped at a finance level of £2m per business with the government guarantee reducing to 70%.
Making Tax Digital (MTD)
MTD for ITSA will be introduced from 6 April 2024. This impacts sole traders and landlords, with income over £10,000.
Reforming R&D tax credits to help drive innovation
From April 2023, businesses will be able to claim relief on the storage of their vital data and pure maths research.
The 130% super deduction introduced at Spring Budget 2021 is due to expire on 31 March 2023. Various potential options to enhance the capital allowances regime from April 2023 are being considered.
VAT on energy saving materials
The Chancellor has announced the removal of VAT on domestic energy saving measures (ESM). The list of ESMs include insulation, solar panels, and heat pumps amongst others to help households manage rising energy costs.
Late payment interest rate rises to 3.25%
Following the Bank of England’s recent announcement increasing the base rate, HMRC have announced that their late payment interest rate will also increase by 0.25%, to 3.25%, from 5 April 2022.
If you have any questions regarding the Spring Statement 2022, please do not hesitate to contact us.