Key Spring Statement Summary 2022 announcements that may affect our clients.

National Insurance

  • The National Insurance threshold will rise in July 2022 so that it is in line with the personal tax allowance of £12,570.  However, this is the first time in my memory that tax or National Insurance thresholds have to be changed midway through a tax year so it will be interesting to see whether there are significant representations from the payroll software industry about this over the next few days.  As a result, we will be waiting until 6 April (the start of the new tax year) before we revise our remuneration recommendations for 2022/23 tax year so look out for our email after that.
  • Due to the change happening in July, the annual National Insurance threshold for payment of employee class 1 NI; self-employed class 2 NI, and class 4 NI for 2022/23 will be £11,908 instead of the projected £9,880.  However, there is no change in the threshold when employers start to pay NI which remains at £9,100.
  • NI is now more similar for the self-employed compared to the employed (although they still pay a lower rate) as the self-employed will now become eligible for benefits if their annual earnings exceed the Small Profits Threshold of £6,725 but won’t actually need to pay any NI until their earnings exceed the new NI threshold of £11,908.
  • The previously announced NI increases relating to the Health & Social Care Levy will still come in from 6 April 2022 so the employer’s NI rate is 15.05%, employee’s NI rate is 13.25% and self-employed NI rate is 10.25%.

Personal Tax

  • The previously announced dividend tax increase relating to the Health & Social Care Levy will come in from 6 April 2022 so dividend tax rates will increase to 8.75%, 33.75%, and 39.35% for basic rate, higher rate, and additional rate dividends respectively.
  • The chancellor announced a cut in the basic rate of income tax to 19% from April 2024 but many things could happen before then and cause this to be changed.

Business

  • In line with the increases in National Insurance, the Employment Allowance has been increased to £5,000 for small employers (if your employer’s class 1 NI was less than £100k in 2021/22 tax year).  The employment allowance is set against the employer’s class 1 NI liability.
  • Green technology, such as solar panels & heat pumps, will be exempt from business rates from April 2022.  This means that any enhanced value to your business property from green technology must be disregarded from the rates valuation.
  • R&D claims can finally include data storage costs from April 2023.  Other reforms are expected with draft legislation being published this summer.
  • There is expected to be an overhaul of the current capital allowances regime with details announced in Autumn 2022.

VAT & Duty

  • VAT will return to the full rate of 20% for the hospitality, accommodation & leisure sectors from 1 April 2022.
  • VAT on energy saving materials such as solar panels, insulation, etc will be cut to 0%.
  • Fuel duty will be cut by 5p per litre for 12 months with immediate effect.

 

Please do reach out to us if you’d like to discuss specifically how any of these changes affect your business.

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