2022 Spring Statement and the Governments Tax Plan to Reform and Reduce Taxes
Chancellor Rishi Sunak has delivered his Spring Statement and set out the Governments tax plan to reform and reduce taxes. The key measures include:
Increasing the NIC Primary Threshold
It was announced that there will be an increase in the Annual National Insurance Primary Threshold from £9,568 to £12,570, from July 2022. This now aligns with the threshold for the personal allowance for income tax, meaning no tax or NIC will be payable for workers earning under £12,570. However, the forthcoming 1.25 percentage point rise in NIC rates will still come into force in April 2022. The increase in the Primary Threshold will offset the increase in NIC rates for those with an income of up to £35,000. There is no increase in the Secondary Threshold.
Reducing Class 2 NIC payments for lower earners
From April 2022, Class 2 NICs will not be payable for self-employed individuals with profits between the Small Profits Threshold of £6,725 and the Lower Profit Limit of £11,908, self-employed individuals with earnings within this bracket will still be able to continue to build National Insurance credits. This change will benefit around 500,000 self-employed people.
Reducing the basic rate of income tax
From April 2024, the Government will introduce a 1% reduction in the basic rate of income tax, reducing it to 19%, however this measure is subject to parliamentary approval. For individuals claiming Gift Aid relief, there will be a three-year transition period to maintain the income tax basic rate relief at 20% until April 2027. The reduction in the basic rate will not apply for Scottish taxpayers, who are taxed at different tax rates set by the Scottish Government.
Increasing the Employment Allowance
From April 2022, the Employment Allowance for small businesses will be increased to £5,000. Eligible employers will be able to reduce their employer NIC liabilities by up to £5,000 per year. This is an increase of £1,000 per employer. The Government estimate that from April 2022, up to 670,000 businesses will not pay NICs due to the increased Employment Allowance.
Immediate temporary cut to fuel duty
The Government have cut the duty on petrol and diesel by 5p per litre until March 2023, to help combat rising oil prices.
The full details on all the measures, can be found at: Spring Statement 2022: documents – GOV.UK (www.gov.uk)