Business Link Magazine catches up with WestBridge Tax Director Tom Moore over the tax changes announced in the Spring Statement.
“Is that it?”, one opposition MP was heard to call out in the House of Commons, just as Chancellor Rishi Sunak delivered the last of his key announcements. The comment was probably a reaction to the relative paucity of help offered to those struggling with the cost of living but might also reflect the thoughts of those in the accountancy and tax professions.
There were a few changes of note.
A change to National Insurance Contributions (NICs) increases both the ‘Primary Threshold’ for Class 1 NICs and the ‘Lower Profits Limit’ for Class 4 NICs from 6 July 2022, aligning them with the personal allowance for income tax which is set at £12,570 per annum. The intention is that these thresholds will remain aligned. That provides both a welcome simplification and a tax saving of up to £330 per annum for those affected.
The ‘Employment Allowance’ will rise from £4,000 to £5,000 from April 2022. This means eligible businesses and charities will be able to claim a greater reduction on the NICs they pay and, from the 2023 to 2024 tax year onwards, their Health and Social Care Levy liabilities.
A time-limited zero-rate of VAT for the installation of certain types of energy-saving materials was announced. The zero-rate will be available for a period of 5 years and will then revert to the 5% reduced rate of VAT.
Rates of Fuel Duty will be reduced for 12 months. This includes cutting rates for diesel and unleaded and leaded petrol by 5 pence per litre. The cut will translate into a reduction in the cost at the pumps of around 6p per litre meaning that the cost of filling the average tank will fall by an estimated £3.30.
The Chancellor also signalled forthcoming reforms aimed at encouraging businesses to invest more in capital spending, provision of high-quality employee training and research and development. There was also the headline announcement of a proposed reduction of the basic rate of income tax to 19% in two years’ time.
Should we have expected more? Probably not.
In the early months of the year speculation concerning tax changes invariably runs rife and the fortune-telling skills of tax professionals are tested by clients and journalists– normally to the point of failure.
Until 2016, the March Budget represented the single most significant statement of tax changes. Since 2017, we have had a ‘Spring Statement’ and a Budget in the late Autumn. Those not paying close attention would be forgiven for being a little confused. We had grown accustomed to both events being, in effect, ‘Budgets’ with both containing a raft of tax changes in broadly equal measure.
Technically – and until relatively recently – only the ‘Budget’ was where the Government announced tax changes. The ‘Budget’ told us how the Government was going to raise money and the ‘Statement’ (whether Spring or Autumn) told us how that money was going to be spent.
If the Spring Statement seemed a little short on announcements that may only be a return to the traditional roles of ‘Budget’ and ‘Statement’ (even if the calendar has changed). As a self-confessed failure at prediction, I for one, would welcome that.
