I’m a big fan of 90 minute films, 250 page books and exhibitions comprising precisely two rooms, so it should come as no surprise that I appreciated the Chancellor’s snappy Spring Statement which clocked in at around the 27 minute mark. We’re all busy (and there's not much to report), so my summary of the key tax announcements affecting businesses and entrepreneurs will follow that style.
There was no reversal of the planned NIC hike. What Rishi did instead was soften the blow. The big announcement was that the thresholds at which most employees and the self-employed start to pay NICs will be equalised with the personal allowance for income tax (at £12,570 per annum). When taking into account the increase of NIC rates by 1.25% which comes in from 6 April 2022, the Institute for Fiscal Studies has estimated that earners on less than £35,000 will be slightly better off, and those above will bear the brunt.
There was also an announcement of a plan to reduce the basic rate of income tax in 2024. Sorry Rishi, two years is a long time in politics, and I’m not giving you credit for that sort of promise. Let’s see, shall we?
There was no equivalent increase in the thresholds at which employers start paying employer NICs. That will still kick in for salaries above £8,840 per annum at a rate of 13.8%, rising to 15.05% in a couple of weeks’ time. The NIC and income tax thresholds remain an impenetrable mess.
The crumb that the Chancellor offered to employers was an increase of the annual allowance for employer NICs from £4,000 to £5,000. Just to be clear that is, at most, an extra £1k of value per business. Not £1k per employee. Per business. Don’t spend it all at once.
To take some of the sting out of rising oil prices, fuel duty will be cut by 5p per litre until March 2023.
And then, to repent of this environmental sin, the Chancellor announced VAT cuts to the installation of various green energy systems (solar panels, wind turbines etc..). They will be zero-rated from April 2022, and the category of VAT-favoured installations is being expanded. As is now traditional thanks was given to Brexit for the ability to reform VAT. The Chancellor also renounced the European Court of Justice and its sinful rulings. Amen.
Research & Development
From April 2023 there will be various changes to research and development tax credits. The previously announced refocusing on R&D within the UK is going to be subject to some qualifications so R&D carried out abroad will sometimes qualify. Clarifications will also be made to the rules around cloud computing and research in relation to pure mathematics. The detail will come in future legislation.
Chancellor Rishi Sunak has unveiled the contents of his Spring Statement in the House of Commons He has come under increasing pressure to act, with prices rising 6.2% in the 12 months to February - the fastest for 30 years.