Chancellor Rishi Sunak has unveiled the contents of his Spring Statement in the House of Commons today.
It is clear that with prices rising 6.2% in the 12 months to February (the fastest for 30 years), he has been under pressure to help households with the cost of living squeeze.
The chancellor announced he would cut fuel duty, raise the threshold at which people start paying National Insurance, and pledged to cut the basic rate of income tax before the next general election.
Here is a summary of the main points:
Reduced by 5p per litre from 6pm on 23 March 2022
Class 1 employees NIC
In September, the government announced that employees will pay 1.25p more in the pound from their pay packet in National Insurance contributions from this April.
In a significant move, the primary threshold of employees NIC will rise from July 2022.
At present, most workers start paying National Insurance contributions when their income hits £9,568. They pay 12% of earnings between £9,568 and £50,270, then 2% on any earnings above £50,270.
Now the chancellor has said, from July, National Insurance will be paid on income over £12,570 a year – the same level as income tax starts being paid.
In practice, the two measures will mean that anyone earning less than about £35,000 a year will pay less National Insurance during the year. That is about 70% of all workers. Those who earn more will see a tax rise, albeit smaller than they would have expected.
- For an employee earning £20,000 a year, it means an annual National Insurance cut of £180 in 2022-23, instead of an £89 rise expected before the announcement, according to accountancy firm Deloitte
- For a £40,000 earner, it means a rise of £70, instead of a previously expected £339 rise
- For a £60,000 earner, it means a £442 rise, instead of a previously expected £711 rise
Self-employed people, who pay at a different rate, will see slightly less of a benefit from the chancellor’s decision.
Over time, this threshold is frozen, which will steadily mean more low-earners will have to pay.
The Employment Allowance (for smaller employers) increases to £5,000 for 2022/23.
The Basic rate of income tax
The Chancellor pledged to cut the basic rate of income tax from 20p to 19p in the pound before the end of this Parliament.
He said in the Autumn he will decide whether to make R&D credits more generous. R&D tax credits are a government incentive designed to reward UK companies for investing in innovation. The credits are a valuable source of cash for businesses to invest in accelerating their development, hiring new staff and ultimately growing.
The government will consider alternative options so that they are able to replace the super-deduction before it expires in April 2023.
VAT on energy-saving materials
This will be reduced from 5% to 0% from April 2022 (this includes insulation, solar panels and wind turbines).