Yesterday, the Chancellor announced his Spring Statement with several changes coming into place from April. These changes are coming into play due to several factors including the recent global pandemic and the current situation happening in Ukraine.
As always, we believe in providing a clear breakdown of what has happened, so we’ll be covering a variety of different topics in today’s blog.
Let’s get started…
Let’s start with a breakdown of the economic forecast…
- The UK economy is forecast to grow by 3.8% this year, a cut from the OBR's previous prediction of 6%. The economy will then grow by 1.8% in 2023, 2.1% in 2024
- Inflation to average 7.4% for the rest of this year, hitting its peak at 8.7% in Q4 of 2022
- Unemployment looks to be lower every year compared to the OBR's previous forecast
What’s the impact on businesses?
From April 2022 the Employment allowance will be increasing by £1,000 to £5,000
With the increase to the employment allowance, this statement builds on the previously announced support for SMEs including:
- Business rates discount for retail, hospitality, and leisure 50% up to £110,000
- Help to grow management scheme to help subsidize the cost of high-quality training
- Help to grow: Digital scheme to help companies adopt new digital technology
- Annual investment Allowance remaining at £1,000,000 up to March 2023
The impact on individuals is something that was a key topic in the Spring Statement. Especially with the ongoing rise in both inflation and energy bills.
Health & Social Care Levy is coming in from 6th April 2022 in two phases, helping to fund the NHS.
- For 2022-23, employer Class 1, employee Class 1, Class 1A, Class 1B, and Class 4 national insurance contributions will increase by 1.25%
- From 6th April 2023, these national insurance contributions will go back down to previous levels and a separate 1.25% levy tax will be introduced
- Dividend tax rate increases of 1.25% will still be coming in from 6th April 2022, with the basic rate dividend tax being 8.75% (previously 7.5%), higher rate dividend tax being 33.75% (previously 32.5%) and additional rate dividend tax being 39.35% (previously 38.10%)
- With dividend tax rates increasing, the tax charge (S455) on outstanding director loans through a limited company will also be increased from 32.50% to 33.75%
- The primary National insurance threshold for class 1 National Insurance Contributions (NIC) and Lower Profits Limit (LPL) will be increased from £9,880 to £12,570 in line with the personal tax-free allowance coming into effect 6th July 2022. "People will be able to earn £12,570 a year without paying a single penny of income tax or national insurance". Chancellor says it is worth £6bn to 30 million people.
- To help ensure self-employed individuals with lower earnings also benefit, from April 2022 self-employed individuals with profits between the Small Profits Threshold and Lower Profits Limit will continue to build up to National Insurance Credits but will not pay any Class 2 NICs.
- Fuel duty will be cut by 5p per litre as of 6 pm 23rd March 2022
- A reminder that the National Living Wage (NLW) for workers aged 23 and over is increasing by 6.6% to £9.50 an hour from 1st April 2022
- April 2024 the basic rate of income tax will be cut from 20% to 19%
If you find yourself still feeling a bit confused about how the Spring Statement will affect you, why not drop us a message? Click here and we will get back to you ASAP!