Submitted by Rachel Sestini
| on Wed, 03/23/2022 - 15:02 | In Budget
, National Insurance
Here are our key takeaways from Rishi Sunak’s Spring Statement today, 23 March 2022:
As stated in the 8-page tax plan, this represents the biggest net cut in personal taxes in over a quarter of a century.
Rishi Sunak’s aims are to help families with the cost of living, to support growth in the economy and to ensure the proceeds of growth are shared fairly.
The key tax measures are as follows:
- An increase in the National Insurance primary threshold and Lower Profits Limit to £12,570, aligning these with the tax-free personal allowance
- An increase in the Employment Allowance which reduces employers’ National Insurance contributions, from £4,000 to £5,000 from April 2022
- There will be a review of the Apprenticeship Levy and other measures aimed at increasing investment in vocational training to see whether it is doing enough to incentivise employers
- Research & Development tax reliefs are to be enhanced, taking total spending from £15Bn a year to £20Bn annually. This will be achieved both by refocusing on work done in the UK and also by including support for data and cloud computing costs, as well as relief on R&D supported by Pure Maths (that was a rather pleasant surprise, am sending a shout out to my fellow pure mathematicians :-))
- Reform and simplification have been promised to the 1,000+ tax reliefs and allowances currently in the system, to make the tax system simpler, fairer and more efficient
- And lastly, a cut to the basic rate of income tax has been announced, taking the rate down to 19% from 2024.
Overall, although this has been heralded as a “Tax Cuts” Spring Statement it’s hard to see how these measures in their entirety will balance out for many taxpayers, particularly those not in the much-referenced “hard-working families” group to whom the tax and NIC cuts have been targeted.
Notwithstanding the enhancement to the Employment Allowance, small businesses with more than a handful of employees will still face increased employers’ NI contributions due to the Health & Social Care levy.
Employees earning over the secondary threshold will find the additional 1.25% HSCL also quickly erodes the increase in the National Insurance primary threshold.
The upcoming increase to the main rate of corporation tax from 19% to 25% will also impact many small businesses with profits of £50,000 or more.
To be clear, I am very much in favour of ringfencing funds for the NHS and very aware of the need to reduce the ongoing increases to the deficit – these comments are designed to promote understanding of the true impact of the upcoming measures announced today alongside those which have already been rolled out.
I would welcome your input on how you believe the overall package of upcoming measures will impact you.
Rachel Sestini, Managing Director, Sestini & Co Group