Spring Budget 2022

9 months, 1 week ago by Oliver Atkinson

The 2022 Spring Statement

The Chancellor Rishi Sunak delivered the Spring Statement to Parliament on the 23rd of March 2022, detailing a number of changes for the upcoming tax year that will run until 5th April 2023. Whilst the majority of changes were already announced in the Autumn budget, there were several new items for the Spring, so let’s take a look through the key points.

Personal Tax & Allowances

There were no changes to the majority of personal tax allowances for this year, instead the headline change this Spring is the increase of the National Insurance Primary Threshold and Lower Profits Limit from £9,880 to £12,570 to match the personal allowance. The government expects to make this change from July 2022. This means that Class 1 and Class 4 National Insurance Contributions will not need be made by employed or self-employed individuals until they hit earnings or profit of £12,570, helping to offset the previously announced rise in rates of National Insurance.

The change also brings with it another small bonus for the self-employed – those with annual profits above the Small Profits Threshold (£6,725) but below the new Lower Profits Limit (£12,570) will build up National Insurance Credits towards their Class 2 NIC, but will not be required to pay them. Whilst we are yet to see any further details about how this will operate in practice, we expect there will be information forthcoming in the not-too-distant future.

The adjustments to the dividend tax rates announced at the end of October 2021 will kick in from this April as follows:

• Basic Rate – from 7.5% to 8.75%
• Higher Rate – from 32.5% to 33.75%
• Additional Rate – from £38.1% to 39.35%

Additionally, there was some news regarding the basic rate of income tax – the government intends to drop the basic rate from 20% to 19% from April 2024, though how this will play out will depend much on the state of the economy over the next 24 months.

Minimum Wage & Employment

We previously talked about the change in minimum wage from April 2022 after it was announced in the Autumn budget, but for those that might have missed it here are those changes again:

• 23 and over – from £8.91 to £9.50
• 21 to 22 – from £8.36 to £9.18
• 18 to 20 – from £6.56 to £6.83
• 16 to 17 – from £4.62 to £4.81
• Apprentices – from £4.30 to £4.81

Following on from last years’ increase in the Employment Allowance from £3,000 to £4,000, the government has seen fit to increase this amount once more from April 2022 to £5,000. This is another measure that could be seen as helping to offset the rise in NIC contributions under Health & Social Care Levy and will provide some breathing room for small businesses employing only a few people.

Corporation Tax

The major change to Corporation Tax was announced in October – that the rate will rise on a taper from 19% to 25% from April 2023 depending on the level of a company’s profit. The upcoming tax year will be the last at which the tax rate is 19% regardless of the profit made by a company. However, once the current ‘super-deduction’ policy on capital allowances spending for UK companies comes to end in April 2023, the government has pledged to put develop a new policy to help encourage business investment in the UK to help offset the rise in the Corporation Tax rate.

Much like the change to Corporation Tax, the government put forward another change to apply from April 2023, this time in regard to R&D Tax Relief. A reform will see allowable costs for cloud and data for R&D carried out in the UK from 2023 to be expanded to allow all cloud computing costs that are associated with R&D.

For the first time, the government has also accepted that some R&D work, especially in fields where geographical, material, environmental or population factors are a consideration, must be carried out overseas if the conditions are not present in the UK. As such, some allowances can now be made for R&D relief where these factors are in play. Lastly, another small but significant change for R&D is that pure mathematics has been brought into the relief as an allowable cost for the first time, expanding the scope of relief available for scientific and technological advancements underpinned by the field.

VAT

Once again there was not too much to report from the VAT front during this year’s Spring Statement. The temporary 12.5% VAT on hospitality and leisure will end on the 31st of March 2022, returning to its previous rate of 20% as previously planned, with the only other news from the Chancellor being the announcement of temporary VAT relief on ‘energy saving materials’ to run until 31st March 2027. This relief will be zero-rating of VAT on items such as solar panels, heat pumps, roof insulation and wind turbines amongst others, currently rated at 5%.

Business Rates

The business rates multiplier will be frozen for the 2022-23 tax year, so as not to place further burden on small businesses still recovering from COVID-19. The already announced 50% cut in business rates relief for retail, hospitality and leisure businesses will go ahead as planned.

Other Taxes & Changes

• Fuel duty to be cut by 5p per litre in the wake of rising oil prices. This will come as welcome news to businesses with significant motor vehicle or freight costs.
• The household support fund for local authorities has been doubled to £1bn to assist low-income households with the rising cost of living.
• A small package of measures to help with rising energy bills, including a £200 ‘loan’ that will be available from October to be repaid over several years.

Here at Atkinsons Chartered Accountants, we provide comprehensive tax, auditing and VAT services to various SMEs in Brighton & Hove. If you'd like support with planning ahead for the next tax year, get in touch today. We're always happy to help your business flourish.