On 23rd March, The Chancellor delivered his Spring Budget Statement to the House of Commons.
Please read on for a summary of the key points of interest, and do get in touch if you are concerned or have questions about how the changes may affect you and your business.
Fuel Duty
With effect from 6pm on 23 March 2022, fuel duty for petrol and diesel has been cut by 5 pence per litre across the whole of the UK. This measure is in place for 12 months. Fuel duty is a government tax which makes up part of the price when you buy petrol or diesel. Until yesterday, it was 58 pence per litre and had been for 11 years.
As we’re all too aware, the average price of a litre of petrol has risen by more than 40p since last year's Spring Statement, so the reduction doesn’t feel significant.
Income Tax reduction
To be implemented in a future Finance Bill, the reduction in the basic rate of income tax for non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland to 19% was announced - but this won’t occur until 2024.
National Insurance Contributions (NICs) threshold
From July 2022 the point at which Employee’s National Insurance is payable increases from £823.33 to £1,047.50 per month (£12,570 per annum); bringing it in line with the income tax threshold. Mr Sunak said this was a tax cut for employees worth over £330 a year.
Employer’s National Insurance doesn’t change – this is still payable on monthly salaries of £758 or more.
Due to this change being implemented part way through the tax year, it causes some complexity on the calculation of optimum salaries and dividends for limited company owners! For businesses that operate as sole trade and partnership structures, the point at which profits are applicable to the 10.25% Class 4 National Insurance has been increased to £11,908, increasing to £12,570 the following year.
Health and Social Care Levy
The Chancellor confirmed that the 12 month increase of NICs payable for employees, employers and the self-employed will go ahead as planned in April 2022, in readiness for the introduction of the Health and Social Care Levy from April 2023.
This means that from April 2022 there will be a 1.25% increase in the National Insurance and Dividends tax rates.
Employment Allowance increase
The Employer’s Allowance is increasing (by £1000) to £5,000 per year from April.
The allowance is essentially a credit on an Employer’s National Insurance bill each year, but it is worth remembering that it is restricted to just one PAYE scheme (i.e. businesses that run more than one scheme, or connected businesses, can only claim the Employer’s allowance for one).
VAT on energy saving materials
A UK wide, time-limited zero rate of VAT for the installation of energy saving materials will come into effect in April 2022. This will apply to installations such as rooftop solar panels, insulation, or heat pumps.
The VAT cut is from 5% to zero, for a period of five years.
This is essentially to stimulate consumer take-up of such measures and may not affect your business in buying such goods if you are VAT registered. It will however benefit property developers and landlords because they can update their rental properties at a discount compared to previously.
Business rates relief for green technologies
The policy regarding business rates exemption for green technologies will come into effect on 1 April this year rather than the same date next year, as announced in 2021’s Autumn Budget. The policy exempts firms from business rates when they invest in “eligible plant and machinery used in onsite renewable energy generation and storage”. It also gives 100% relief for eligible low-carbon heat networks with their own rates bill.