On the morning that the Office for National Statistics announced the latest figures showing inflation at 6.2%, Chancellor Rishi Sunak gave his Spring Statement speech at the dispatch box.
With the expiry of the Coronavirus Act, the UK is now in a self-declared post-pandemic era, but faces high inflation as the worlds supply chain struggles to adjust to huge pent-up demand, pushing up prices.
Meanwhile, the price of fuel and energy have also risen, pushing many families into a cost of living crisis. The war in Ukraine has only exacerbated the situation.
The Spring Statement was made against this backdrop, but did it go far enough?
Spring Statement for individuals
The Chancellor announced a range of policies designed to lift the load from individuals and families.
Most notable was the rise of the National Insurance contributions (NIC) threshold, which had been scheduled to rise by £300 in the new tax year.
Instead, Sunak revealed the threshold would be increased by £3,000 to bring it in line with the income tax personal allowance (£12,570) as promised in the 2019 Conservative manifesto.
This means less of someone’s earnings will be within the scope of NICs.
However, the 1.25% uplift in NIC rates will still go ahead from 6 April, although the Government says the threshold change will mean around 70% of NICs payers will pay less NICs.
The Resolution Foundation said otherwise, stating that seven-in-eight workers will pay more in NICs in 2024/25.
Meanwhile, the Chancellor said income tax would be cut from 20% to 19% by 2024 – a tax cut averaging £175 for taxpayers.
He also announced more immediate support for the cost of living crisis, including a cut of fuel duty by 5p and doubling the household support fund to £1 billion.
Spring statement for businesses
Most important for business owners was what Sunak did not say – again, the NIC increase was not cancelled as many have called for, so employers can expect to pay a rate of 15.05% from April 2022.
However, the Chancellor did increase the employment allowance from £4,000 to £5,000, which sees £1,000 more of an employer’s earnings untouched by NICs.
Of course, businesses will also benefit from the cut in fuel duty, which will be in place for the next five years and is worth £5bn.
Businesses looking to grow green or just save on their energy costs can also benefit from a reduction in VAT for energy-saving materials from 5% to 0%. Such materials include everything from solar panels to heat pumps and insulation.
Going forward
Despite the aid, many do not think it goes anywhere near far enough, even when you factor support already announced, such as the business rates discount and a rise in the minimum wage.
For instance, the Resolution Foundation said:
“Significant measures were announced on both counts, but the policies do not measure up to the rhetoric.”
Therefore, it’s in the best interest of individuals and businesses to look for solutions to their financial situation.
As financial experts, and accountants for businesses and individuals, we can help you find the right solutions for you, whether that’s through a tax strategy personalised to you or just some effective budgeting tips.
Talk to us about your financial situation and how we can help.