A Summary of the Spring Statement 2022

The Chancellor, Rishi Sunak, delivered his first Spring Statement on Wednesday 23 March 2022 which felt more like a mini-budget as he attempted to address the current crises facing many households. Included in his statement, The Chancellor laid out his three-part plan to ‘strengthen the economy’ which included an immediate 5 pence per litre reduction in fuel duty.

Increase in the National Insurance threshold and Lower Profit Limit

To align the starting thresholds for income tax and National Insurance contributions (NICs) the Primary Class 1 NIC threshold (paid by employees) will increase on 6 July 2022 from £9,880 to £12,570. This means low paid workers will take home more of their earnings before they begin to pay NICs.

The Lower Profit Limit (LPL) is the point where the profits of Self-employed individuals become subject to Class 4 NICs. From 6 April 2022, the LPL is increasing to £11,908 and from April 2023 the limit will be increased further to £12,570.

The effect of the increase in these thresholds to workers is of course reduced due to the already announced hike in the rates of NICs payable, a move which many had called for to be scrapped.

Increased Employment Allowance

The Employment Allowance will increase by £1,000 from April 2022 for all eligible employers. This increase will enable employers to reduce their employer NIC bills by up to £5,000 per year.

VAT on energy-saving materials

From April 2022, for a limited time, there will be a zero rate of VAT for the installation of energy-saving materials including rooftop solar panels.

Income tax reduction

Perhaps the most unexpected announcement was the reduction in the basic rate of income tax from 20% to 19%. This is to be effective from April 2024. Although great news for taxpayers, this offers little assistance in helping with the current rising costs of living as the UK faces an average inflation rate in 2022 of 7.4%.