SPRING STATEMENT 2022 - key points at a glance
The Chancellor has delivered his mini-Budget to give people a helping hand with their finances as inflation hits a 30-year high. The rate of Consumer Price Index inflation jumped to 6.2 per cent in February, from 5.5 per cent in January, the ONS said on Wednesday morning.
EMPLOYMENT ALLOWANCE RAISED TO £5K
In a bid to support businesses, the Chancellor announced a 20% rise in the employment allowance from the new tax year.
This measure will increase the employment allowance by £1,000, from £4,000 to £5,000. This will come into effect from 6 April 2022.
Eligible employers are those who have secondary Class 1 National Insurance contributions (NICs), and additionally from the 2024 to 2025 tax year onwards health and social care levy liabilities of under £100,000 in the previous tax year.
1P INCOME TAX CUT IN 2024
The Chancellor announced long-term plans to cut the basic rate of income tax from 20% to 19% in 2024. There will also be a three-year transition period for Gift Aid relief to maintain the income tax basic rate relief at 20% until April 2027.
A coincidence, or a well-planned strategy? If it comes into effect from April 2024, the cut will arrive in your first payslip at the same time of election leaflets ahead of the next planned general election in May 2024.
£2,690 INCREASE IN NATIONAL INSURANCE THRESHOLD
The Chancellor announced plans to raise the national insurance threshold by £2,690
The threshold will increase by £2,690 from the current £9,880 to £12,570 from 6 July 2022, equalising the NICs and income tax thresholds for the first time, and potentially pointing towards a merger of income tax and NICs into a single threshold.
The rise in the threshold will cut tax by an average £323 per worker.
The government is also taking steps to ensure that self-employed individuals with lower earnings fully benefit. From April 2022 self-employed individuals with profits between the Small Profits Threshold and Lower Profits Limit will continue to build up National Insurance credits but will not pay any Class 2 NICs.
This measure will increase the Primary Threshold (PT) for Class 1 NICs and Lower Profits Limit (LPL) for Class 4 NICs from 6 July 2022, aligning it with the personal allowance for income tax, which is set at £12,570 per year.
FUEL DUTY CUT BY 5P PER LITRE
As petrol and diesel prices rise at unprecedented rates, the Chancellor cut fuel duty by 5p per litre across the UK from 6pm tonight.
The cut in fuel duty is going to be in place for the next 12 months.
The fuel duty also includes a reduction of 5% for aviation gasoline (Avgas).
ZERO RATE VAT FOR SOLAR PANELS
The Chancellor set out plans to remove VAT from investment in solar panels and heat pumps. As energy costs rise, for next five years homeowners having solar panels and heat pumps installed will pay zero rate VAT, and there will be a zero rate for investment in wind and water turbines.
To help households improve energy efficiency and keep heating bills down, the government will expand the scope of VAT relief available for energy saving materials including solar panels and wind turbines, so that households having energy saving materials installed pay 0% VAT. The current rate is 5%.
The zero rate VAT scheme will start on 1 April and will run until March 2027.
A typical family having roof top solar panels installed will save more than £1,000 in total on installation, and then £300 annually on their energy bills.
The changes will take effect from April 2022.