With the ongoing invasion of Ukraine contributing to the increasing cost of living, Rishi Sunak delivered his Spring Statement the same day inflation figures revealed they had hit a 30 year high of 6.2%.
In his Statement, Sunak revealed inflation is forecast to average 7.4% for the year.
According to the Office of Budget Responsibility (OBR) the UK’s economy is set to grow 3.8% in 2022 – lower than previous estimates. However, the OBR also noted: “Given the evolving situation in the war in Ukraine and the global response, there is significant uncertainty around the outlook for global Gross Domestic Product (GDP).”
With that said, Sunak tempered expectations, saying he wanted to take a sensible approach to sustainable public finances.
Still, there were a number of notable tax changes made today which could affect you.
He kept in place the increase to the National Insurance (NI) Rate due to come into force next month. However, in order to help ease the burden for taxpayers, he announced the threshold for paying NI would be increased by over £3,000 – to £12,570. This brings the threshold to the same level as Income Tax.
High earners will still end up with high NI costs, however it will reduce the impact for lower earners.
As expected, the Government also signalled a 5p per litre cut in fuel duty to help motorists struggling with increasing prices. The cut is planned to last for 12 months.
Along similar lines, the Government also expanded the scope of its VAT relief available for energy saving material (for example heat pumps and solar panels). These materials will now incur 0% VAT for the next five years.
The Household Support Fund for local councils will also be doubled to £1 billion from April.
Looking ahead, the Government revealed that the basic rate of income tax will be cut by 1p from 2024. Announcing the change, Sunak said: “Given the evolving situation in the war in Ukraine and the global response, there is significant uncertainty around the outlook for global Gross Domestic Product (GDP).”
Previewing the Autumn budget, Sunak announced a series of reviews taking place, including reviews into Business Investment Tax, R&D Tax credits and the Apprenticeship Levy.
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