Chancellor Rishi Sunak has delivered his Spring Statement to the House of Commons, on a day it was revealed inflation had hit a 30-year high.
Estimates from the OBR on inflation, growth and debt repayment suggest;
- Inflation is forecast to average 7.4% this year
- UK growth is expected to be downgraded to 3.8% this year, a sharp cut from its previous prediction of 6.0%
- UK to spend £83bn on debt interest in the next year
Rishi Sunak opened by highlighting the war in Ukraine and said Britain’s economic strength underpinned freedom and liberty. The chancellor said he would respond to the conflict by building a stronger, more secure economy for the UK.
Highlights from the Spring Statement
Here are the main highlights we have identified from the Spring Statement:
- Fuel duty will be cut by 5p a litre from 18:00 GMT today until March 2023
- The National Insurance threshold will be raised by £3,000, meaning people must earn £12,570 per year before paying income tax or NI.
- The Employment Allowance, which gives relief to smaller businesses’ National Insurance payments, will increase from £4,000 to £5,000 from April
- From April 1 eligible businesses in the Hospitality, Leisure and Entertainment will now be able to receive a temporary 50% business rates relief worth almost £1.7 billion
- Reforms to R&D Tax Credits to be unveiled in the Autumn Budget
- The basic rate of income tax will be cut from 20p to 19p in the pound before the end of this Parliament
For a more detailed overview of the measures announced, you can view HMRC’s Business Support Factsheet.
National Insurance Threshold
Aside from the 5p cut to fuel duty, it was the National Insurance Threshold announcement that stood out to us.
As part of a package of measures to raise funds for health and adult social care, it was announced last year that National Insurance would increase by 1.25% from 6 April 2022. There had been calls for this increase to be delayed or all together scrapped however this was not the case. Instead, it was announced the National Insurance threshold will be raised by £3,000, meaning people must earn £12,570 per year before paying income tax or NI.
National Insurance Illustration
This example illustrates what the changes to National Insurance will have for someone earning £25,000 per year. Prior to the Spring Statement, net pay was expected to fall £13 per month, as a result the announcement made in the Spring Statement, it is now expected to increase £14 per month, meaning individuals will be better off. These changes will be of benefit to individuals earning a salary of £36,000 and under.
|2021 -2022||2022-23 Pre Spring Statement||2022-23 Post Spring Statement|
|Annual | Monthly||Annual | Monthly||Annual | Monthly|
|Gross Pay||25,000.00 | 2083.33||25,000.00 | 2083.33||25,000.00 | 208.33|
|Tax||2,486.00 | 207.16||2,486.00 | 207.16||2,486.00 | 207.16|
|Ni||1851.84 | 154.32||2,003.40 | 166.95||1,678.05 | 139.83|
|Net||20,662.08 | 1721.85||20,510.52 | 1709.21||20,835.95 | 1736.32|
Growing businesses need more from their accountant; as business accountants, analysts and advisors, we help you understand and manage your numbers to drive plans and decision making.
If you have any questions about how the Spring Statement will affect you and your business, please get in touch. Email [email protected] or call 0800 112 0880.