Spring Statement – what were the key tax announcements?
Income tax and NI
The Chancellor increased the threshold at which NI contributions are paid as was widely expected. The NI threshold will now be aligned with the tax personal allowance at £12,570 from 2022/23 for both Primary Class 1 and Class 4 NI. However, the increased rates for the year and the Health and Social Care Levy as previously announced in the Autumn Statement 2021 were not abolished.
Surprisingly, the change will not take effect until July 2022 which means that the first 13 weeks of the year will use the existing weekly and monthly thresholds, with the increase coming in July 2022.
For directors using an annual pay period, the Primary Class 1 allowance for the whole tax year will work out at £11,908. The threshold for paying Class 2 NI has been aligned with the Lower Profits Limit, i.e. £11,908 for 2022/23.
A little bit of good news for some small employers is that the Employment Allowance that offsets Secondary Class 1 NI will increase from £4,000 to £5,000. This will also come into effect from April 2022.
Finally, the Chancellor also announced that the income tax basic rate will fall from 20% to 19% from April 2024. This appears to be a move ahead of a general election around that time as opposed to genuine tax and economic measure.
VAT on certain energy saving equipment has been cut from 5% to 0% for a period of five years. This includes thermal insulation and solar panels, and similar items. Fuel duty was also cut by 5p per litre, effective from 6pm on 23 March 2022. This cut will last for one year, subject to any extension.