The Chancellor’s Spring Statement on 23 March 2022 set out the Government’s tax plan to support the UK economy, businesses and families in both the short and the medium term. With recent cost of living increases due to the war in Ukraine and inflation expected to reach an average of 7.4% for this year, many commentators including the Shadow Chancellor Rachel Reeves made the point the benefits do not go far enough, particularly doing little for those living in poverty and that the NHS Social Levy should have been delayed.
Income Tax
• Basic rate of income tax is to be reduced from 20% to 19% from April 2024. This measure is to only apply to non-dividend income.
Employment Taxes
• An increase to the National Insurance Primary Threshold for Class 1 NICs from 6 July 2022, aligning it with the income tax personal allowance currently set at £12,570 until 5 April 2026.
| Primary Threshold | 2021/22 Rates | 2022/23 Rates to 5 July 2022 | 2022/23 Rates from 6 July 2022 |
| £ | £ | £ | |
| Weekly | 184 | 190 | 242 |
| Monthly | 797 | 823 | 1,048 |
| Annually | 9,568 | 9,880 | 12,570 |
The calculation of NIC is not cumulative with non-directors benefiting from the higher thresholds for only nine months. Directors NIC is calculated on a cumulative basis and it is not yet clear how this will be operated to take into account the change in threshold during the Tax Year.
The change in threshold has been delayed until July 2022 to give software developments time to update payroll software.
• The Employment Allowance will be increased by £1,000 from 6 April 2022 to £5,000.
Self-Employed
• Class 4 NIC lower profits limit (LPL) will increase in 2022/23 to £11,908. Profits in excess of the LPL will be subject to a rate of 10.25%.
• From 6 April 2023, the Class 4 LPL will be £12,570.
• Class 2 NIC small profits threshold (SPT) will increase in 2022/23 to £11,908 in line with Class 4.
• Self-employed individuals with profits below the SPT will be treated as qualifying contribution years for national insurance credits to be able to access state pension and other contributory benefits but will not pay any Class 2 NIC.
Companies
• Improvements to the research and development (R&D) tax reliefs with support for data and cloud computing costs, a focus on R&D undertaken in the UK and to allow business to claim relief on R&D supported by pure maths.
• The Government is concerned with the differential between the R&D schemes operated, the Research & Development Expenditure Credit (RDEC) mainly claimed by larger companies and those with subsidised expenditure and the small and medium business scheme (SME). The RDEC scheme stimulate between £2.40-£2.70 additional private R&D expenditure for each £1 of tax relief claimed, while the SME scheme only stimulates £0.60-£1.28.
• The Government is considering increasing the generosity of the RDEC scheme to boost R&D investment.
• The Government is concerned with abuse of the generous R&D reliefs, particularly in the SME scheme with further measures to tackle abuse expected to be announced.
• Further announcements are to be made in Autumn 2022 in respect of both R&D schemes.
• The super-deduction is expected to cost around £10bn which is to end in from April 2023. The Government is considering reforms to ensure capital expenditure continues to meet policy objectives and is expected to be subject to consultation.
• Following the Government’s review of Enterprise Management Incentive (EMI) schemes, the Government has concluded the current EMI scheme remains effective and appropriately targeted.
• The scope of the review has been expanded to considered other tax-advantaged share schemes with an initial opinion the Company Share Option Plan (CSOP) should be reformed to support companies as they grow beyond the scope of EMI.
VAT
• To help households improve energy efficiency and keep heating bills down, the government will expand the scope of VAT relief available for energy saving materials and ensure that households having energy saving materials installed pay 0% VAT.
• The 0% VAT rate will not apply to energy saving materials in Northern Ireland due to the NI protocol. Until such time as the 0% VAT rate can be expanded to Northern Ireland, the Northern Ireland Executive will receive a share of the value of this relief under the Barnett formula.
Fuel Duty
• As widely speculated, an immediate reduction in duty on diesel and petrol from 6pm on 23 March 2022, by 5 pence per litre for 12 months.
Please do not hesitate to contact us if you any questions or concerns on how the above changes may impact you or your business.
Leave a Reply