24 Mar Spring Budget 2022

National Insurance

The spring statement increases the annual national insurance primary threshold and lower profits limit from £9,880 to £12,570. This will align with the income tax personal allowance. Meaning individuals are now able to earn £12,570 without needing to pay any tax or national insurance.

The change in threshold is taking place from July 2022.

However, as announced in the Autumn budget the NI rate is increasing to 13.25%, a 1.25% increase.

Using varying levels of salary, we have prepared some examples showing the net savings or additional cost to employees when comparing the 2021/22 and 2022/23 tax years.

Reduction of Basic Rate Band by 2024

The government aim to reduce the basic rate of income tax from 20% to 19% from April 2024 in England. This means for every £1 earned, there will be a 1 pence reduction in tax. It should be noted that this represents the first cut in the basic rate of income tax in 16 years by the UK government.

It should be noted that this is for the ‘Rest of UK’ at present, the Scottish and Welsh government have not issued their tax plans yet.

Employment Allowance

The employment allowance will increase from £4,000 to £5,000. The government added that this assists in making it cheaper to employ workers.

This change will take place from April 2022.

R&D

The government wants businesses to invest more, train more and innovate more to foster a new culture of enterprise. To do this, the government intends to cut and reform business taxes to create a culture of enterprise.

It is expected that there will be R&D tax credit reforms that will be reviewed in August. It is likely that cloud computing costs relating to R&D will qualify for relief. Further, it is likely that the government will legislate the overseas activities that qualify for relief as the government is committed to refocussing support towards innovation in the UK.

Support for SMEs

Along with the increased employment allowance, to support businesses to invest and grow, the temporary £1 million level of the Annual Investment Allowance has been extended to 31 March 2023.

In addition, eligible retail, hospitality, and leisure businesses will also benefit from a new temporary 50% Business Rates Relief in England and Wales.

Fuel Duty

Fuel duty is to be cut by 5 pence per litre until March 2023.