Spring Statement 2022: Business reaction

By Nick Batten on 24 March, 2022

Chancellor Rishi Sunak delivered his annual Spring Statement speech yesterday where he set out the Government’s tax plan to support the UK economy, businesses and families in both the short and the medium term.

Key measures the Chancellor announced as part of the plan include:

  • an increase to the National Insurance Primary Threshold for Class 1 National Insurance Contributions (NICs) and the Lower Profits Limit for Class 4 NICs from 6‌‌‌ ‌‌July‌‌‌ ‌‌2022, aligning it with the equivalent income tax personal allowance which is set at £12,570 per annum
  • from April 2022, self-employed individuals with profits between the Small Profits Threshold (SPT) and the Lower Profit Limit will not pay Class 2 NICs, while allowing individuals to be able to continue to build National Insurance credits
  • the Employment Allowance will be increased by £1,000 from 6‌‌‌ ‌‌April 2022 to £5,000, which will benefit around 495,000 businesses
  • an immediate reduction in duty on diesel and petrol from‌‌‌ ‌‌6‌‌‌‌pm on 23‌‌‌ ‌‌March 2022, by 5‌‌‌ ‌‌pence per litre, for 12 months.

 

Ian Lloyd, Partner at Milsted Langdon shares his thoughts…

Ian Lloyd, Partner at Milsted Langdon

“The increase to the National Insurance threshold, which will be introduced in July, will bring the rate in line with Income Tax and should help to alleviate the pressures created the Health and Social Care Levy, which sees National Insurance Contributions (NICs) increase by 1.25 percentage points from April.

“Unfortunately for employers, this rise in the threshold won’t benefit them as it doesn’t apply to the secondary threshold by which employer’s NICs are set.

“However, the Chancellor did increase the Employment Allowance, which reduces eligible employers’ annual National Insurance liability, from £4,000 to £5,000.

“This is a small giveaway considering that employers already face a higher National Insurance bill from next month and increases in other employment costs, such as the National Minimum and Living Wage.

“The changes will make the setting of salaries more complicated for employers, while also forcing many business owners and directors to consider their own pay.

“Business owners will want to make sure that they pay themselves a sufficient salary so that they meet the annual qualifying NICs so that they can benefit from a full state pension later in life.

“Beyond the changes to National Insurance and the cut in fuel duty, individuals will also welcome proposals to cut the basic rate of income tax from 20 percent to 19 percent from April 2024.

“There were some positives to come out of the speech for businesses. The Chancellor intends to reform other tax reliefs in the Autumn Budget later this year with a focus on ‘people, capital and ideas’, importantly improving access and funding via the R&D tax credit scheme through further reforms that could offer a £5 billion boost by 2024.

“Most workers and businesses will welcome the tax cuts, but difficult decisions still lay ahead given rising costs.”