Chancellor Rishi Sunak recently gave his Spring Statement in Parliament to address the rising cost of living on the day inflation hit 6.2%.
The UK is now in a self-declared post-pandemic era but faces high inflation as the world’s supply chain struggles to adjust.
This huge pent-up demand has pushed up prices of most industries, with sectors like energy being affected the most.
It was against this backdrop that Sunak delivered his speech – but what did it mean for you?
Spring Statement for individuals
Much of the Spring Statement focused on how the Government would help individuals and families cope with the cost of living crisis.
Most notable was the rise of the National Insurance contributions (NICs) threshold.
Originally, the Government had intended to increase the threshold by £300, but Sunak instead announced they would increase it by £3,000.
This will bring the point at which people pay NICs in line with the point at which people pay income tax (£12,570) – as promised in the 2019 Conservative manifesto.
However, the 1.25% uplift in NIC rates was not abolished – this rise kicked in on 6 April 2022, although the Government says the threshold change means around 70% of NICs payers will pay less in NICs.
Meanwhile, Sunak announced income tax would be cut from 20% to 19% by 2024 – a tax cut averaging £175 for taxpayers.
He also announced increased support for the cost of living crisis, including a cut of fuel duty by 5p and a doubling of the household support fund to £1 billion.
Spring statement for businesses
The most important takeaway for businesses was what Sunak did not say – again, the NICs increase was not cancelled as many business leaders have called for, so employers will pay a rate of 15.05% from April 2022.
However, the Chancellor did increase the employment allowance from £4,000 to £5,000, which will save an extra £1,000 more of an employer’s earnings from NICs.
Businesses, as well as individuals, will also benefit from the cut in fuel duty, which will be in place for the next five years and is worth £5bn.
Businesses looking to go green or just save money on their energy costs can also benefit from a reduction in VAT for energy-saving materials from 5% to 0%.
Going forward
Despite the support announced in the Spring Statement, many didn’t think it went far enough to help with the most recent economic forecasts – even when factoring in incoming policy changes, such as the business rates discount and a rise in the minimum wage.
For instance, the Resolution Foundation said:
“Significant measures were announced on both counts, but the policies do not measure up to the rhetoric.”
As such, individuals and businesses should search for other solutions for their unique financial situation.
As financial experts for businesses and individuals, we can help you find the right solutions for you, whether that’s with a tax strategy or effective budgeting tips.
Talk to us about your financial situation and how we can help.