Clive Owen LLP

Spring Statement reaction

23/03/2022

Lee Watson, tax partner, Clive Owen LLP 

As expected, there were a few changes to support the cost-of-living crisis being faced by the British public, with sharply rising inflation and increased fuel and energy bills.

Positive news for those most affected includes a small, 12-month cut in fuel duty and a substantial rise in the threshold at which employees start paying NICs. Also announced was a substantial rise in the Employment Allowance to help employers.

The 5p per litre cut in fuel duty will be a welcome relief if it is passed on to the consumer.

The NIC threshold increase should result in an overall tax cut for employees earning less than £35,000, despite the 1.25% NIC rise which the Chancellor is standing by, despite calls for a delay.

One of the final announcements from the Chancellor is one which is likely to grab a fair share of the headlines. Before the end of the current Parliament in 2024, the basic rate of Income Tax will be cut from 20% to 19%, a move which will impact the amount of tax that an estimated 30 million people pay.

In terms of business support there were also a few positives with the Chancellor announcing that he is planning to give further incentives to industry to invest more as part of a new culture of enterprise, including increased tax relief for innovation and training. He is also reviewing the Apprenticeship Levy.

Also, it was announced that the Employment Allowance, which small businesses can apply for in order to reduce their annual National Insurance liability, is due to increase from £4,000 to £5,000 in April 2022. It’s estimated this increase could be of value to approximately half a million businesses.

Finally, the Chancellor announced that details of the long-awaited plan to reform tax credits received by companies for the research and development activity they undertake, is expected to be set out in the Autumn Budget.

I feel that the Chancellor is navigating a very difficult path with significant pressure on public finances and a public and businesses facing increased costs that need government support. Perhaps we can expect more in the Autumn Budget, but that feels very distant at the moment.

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