Harold Sharp’s Summary Report provides a full round-up of the announcements that might impact you and your business. Below we provide our initial reflections on the Statement.
In this year’s Spring Statement, the Chancellor faced immense pressure to act on living standards amid escalating energy costs, rising household bills and increased taxes. It provided an opportunity to help out (without eating out…) but did it deliver?
The Chancellor focused on three key areas: People, Capital and Ideas, and delivered the biggest net cut to personal taxes in over 25 years.
Perhaps the biggest surprise was on National Insurance, with the tax threshold being lifted by £3,000 to £12,570. The change, which will come into effect in July, is expected to give 30 million people each a £330 tax cut. That said, this must be considered alongside inflation and pay rises. It may be perceived that the Chancellor is playing the long game, ahead of the tax hike to National Insurance contributions by 1.25%.
Tax applicable to dividend income is also set to increase by 1.25%. Many small business owners who took a minimum salary alongside dividends missed out on support during Covid. There is no additional support for these individuals, which may result in more tax planning with minimum salary earners.
In a bid to support SMEs, the Chancellor announced a 50% business rates relief for eligible retail, hospitality and leisure properties. Employment Allowance will also increase by £1,000 to £5,000 from April, which is expected to help circa half a million small businesses by making it cheaper for firms to hire workers.
Further, he committed to R&D tax credit reform. UK business R&D investment is less than half of the OECD’s average as a percentage of GDP. As previously mentioned, the scope of reliefs will be expanded to cover data, cloud computing and pure maths. The government will also consider increasing R&D tax credit rates from Autumn.
There are numerous schemes available, giving both hope and funding to SMEs, but we urge business owners that they must seek it out and apply to benefit from it. We endeavour to keep you up to date with available schemes as they are announced, including the Help to Grow: Digital initiative.
Other key takeaways:
- VAT on energy saving materials, such as heat pumps, insulation and solar panels, will be zero rated (down from 5%) for the next 5 years
- 5p cut to fuel duty, due to be in place for the next 12 months, will take effect from 6pm on 23 March
- A further £500m will be put into the Household Support Fund
- Basic rate of income tax will be cut from 20% to 19% from 2024
The Chancellor promised to build a stronger, more secure economy. But we must remember that this is the Spring Statement and things can change again when we hear the full Budget in the Autumn. Watch this space.
If you have any questions or would like to discuss your own circumstances in more detail, please get in touch with your usual contact at Harold Sharp or email email@example.com and we will be happy to assist.
Our handy Spring Statement Summary Report provides a full round-up of the changes, as announced on 23 March 2022.