By Angela Keery, Head of Tax
The Chancellor of the Exchequer delivered his Spring Statement yesterday to the backdrop of a deepening cost of living crisis. While it brought relief in the form of a reduction in fuel duty that drivers will notice at the pumps today, this is a modest saving at best and comes at a concerning time for many.
In reality, yesterday’s headlines show support for families and businesses but do little to ease the pressure. With costs rising to unprecedented levels and previously announced tax increases yet to take effect, the pending rises will in most cases outweigh any tax savings announced at the despatch box.
With the impact of Brexit and Covid, many of us are already facing significantly increased costs. This is both in business and personally, as companies are forced into the position of passing their own increased cost bases, particularly in terms of energy bills, on to the consumer.
Then we have the multiple tax increases announced last Autumn that are due to come into play next month. Businesses are preparing to mitigate these measures, which include the Health & Social Care Levy, a 1.25% increase on dividends and National Insurance Contributions that will be payable by both employer and employee.
Some had indicated their hopes for an extension to the reduced VAT rate of 12.5% past April, however the rate will return to 20% next month. Plastic packaging tax will also go ahead, and the increase in Corporation Tax to 25% will happen in April 2023. The budget delivered in the face of these challenges yesterday was helpful, yet it is unlikely to make any significant dent.
In real terms, the reduction in fuel duty of 5p per litre until March 2023 is a modest saving of £50 to £60 for the average family car each year, and comes as the Government generates more in fuel duty than it did this time last year.
The National Insurance threshold will increase by £3,000 in July, aligning it with the Personal Allowance for Income Tax purposes. This is a potential saving of £375 per year per employee. The Health & Social Care Levy is however payable from April 2022, and the Chancellor announced that, when taking the two measures together, 70% of people would be better off.
The final significant announcement of cutting the lower rate of Income Tax from 20% to 19% in 2024, will again have a maximum benefit of £375 for those earning over £50,000. This is a welcome reduction, but again is unlikely to be enough for the many facing increased costs in all areas.
One headline that did come as a surprise was the VAT relief on solar panels, insulation and heating pumps. Applicable in Great Britain only, this has made the political situation around the Northern Ireland Protocol even more difficult as it cannot take affect in Northern Ireland and comes amid a series of other announcements that will do little to ease the pressure here.
To discuss any aspect in more detail please contact Angela by email firstname.lastname@example.org or Tel: 028 9032 3466