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The Chancellor, Rishi Sunak, delivered his annual Spring Statement on 23rd March 2022.
Major changes to UK taxes and allowances are usually announced in the Autumn Budget. However, the UK economy is facing unprecedented challenges with the Bank of England warning that inflation could reach 8% in the coming months and the ever increasing cost of fuel, food and energy causing a “cost of living crisis.” Because of this, the Chancellor made some important announcements in his Spring Statement that will affect small business owners and the self-employed.
Some of these changes take effect immediately or from April 2022, while others are planned for the coming months and years.
Fuel duty reduction of 5p per litre from 6pm on 23 March 2022
With the cost of fuel at its highest ever level, the Chancellor announced a reduction in the fuel levy of 5p per litre for the next 12 months. The reduction began at 6pm on 23rd March 2022.
VAT reduced to zero for green energy for homeowners from April 2022
Homeowners installing heat pumps, insulation and solar panels will not pay VAT on these improvements from April 2022. The zero rate will continue for the next five years.
Employment Allowance increase to £5,000 from April 2022
From April 2022, the Employment Allowance will rise to £5,000. Eligible small businesses can use this to claim relief on employer National Insurance payments.
Increase in National Insurance Contribution threshold from July 2022
The National Insurance Contributions (NICs) increase for employers and employees, which is earmarked for future health and social care expenditure, will be introduced as planned from April 2022. This will see payments rise by 1.25%.
From July 2022, the NICs primary threshold for employees will also increase by £3,000, so staff can earn up to £12,570 without paying any National Insurance tax.
For sole traders, the threshold to start paying Class 4 NICs increases to £12,570 from July 2022.
Basic rate of income tax expected to be cut by 1p in the pound from 2024
The basic rate of income tax is planned to be cut from 20p to 19p in the pound by the end of this parliamentary term, which is 2024. The Chancellor confirmed it would be the first cut in 16 years.
Business investment tax credits to be reformed
The system of research and development tax credits is being reformed and extended to include pure maths related research. This is in addition to the previously announced expansion for cloud and data expenditure. The government will announce any tax rate changes for business investment at the Autumn Budget.
Want to know what these changes mean for your business? Book a call with one of our experts now and they’ll guide you through.
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