On the 23 March the Chancellor unveiled his Spring Statement. In the current climate of rising inflation and increasing wage, fuel and raw material costs we hoped the Chancellor would bring some respite for small businesses and sole traders. Here we explore the key points. 
Before we get to the good news, it was confirmed that the planned 1.25% National Insurance increase and the new Health and Social Care Levy will still kick in from April 2022. As a reminder, this also impacts dividends. See more details on this here

The good news... 

The Chancellor announced 3 new measures that will directly help small businesses and your lower-paid employees right now: 
 
Employment allowance will be increased to £5,000 per year, up from £4,000, from April 2022. For businesses with employees, this will help to offset some of the extra Employer NI costs coming in from April 2022.  
 
From July 2022 the National Insurance Primary Threshold will increase to be in line with the income tax personal allowance, from £9,880 to £12,570. This brings the NI threshold in line with the Personal Allowance - which is brilliant for helping to simplify things! In combination with the 1.25% NI increase, this means that anyone earning less than around £35,000 will pay less National Insurance overall during the year. For directors, this may mean that it becomes more tax efficient (overall) to take a higher salary than previously. We will be contacting our clients regarding this.  
 
A 5p per litre cut in fuel duty for 12 months starting 6pm 23rd March. This is a saving of approx £100 per year for the average car driver, £200 for the average van driver and £1,500 for the average haulier. 

Other Announcements 

A planned reduction in the lower rate of income tax to 19% from April 2024. 
 
VAT on the installation of certain types of energy-saving materials, such as solar panels, heat pumps band insulation, to be cut from 5% to 0% (not applicable to Northern Ireland). 
 
From April 2023, the qualifying expenditure for R&D tax credits will now include the storage of vital data, pure maths and cloud computing costs. 
 
Discounts for business rates from April 2022 of 50% for businesses within the retail and hospitality sector. 
The Chancellor also hinted that we can expect the Autumn Budget to feature more tax reform and simplification, particularly to tax reliefs and allowances. 

Previously announced changes remain, including:- 

Increasing the National Living Wage by 6.6% to £9.50 per hour for workers aged 23 and over from 1 April 2022. 
 
Personal income tax allowance of £12,570 and the basic rate limit of £37,700 are frozen up to April 2026. 
 
The three income tax rates applied to dividend income will each increase by 1.25% for 2022/23 onwards and the dividend allowance will remain unchanged at £2,000. 
 
Corporation tax will rise to 25% in 2023, but businesses with less than £50,000 in profits will continue to pay the 19% rate. Those with profits between £50,000 and £250,000 will pay a rate between 20% and 24% on a tapered basis. 
Download our full Spring Statement 2022 Summary. 
 
If you have any questions on how the Spring Statement impacts you, please get in touch
 
Written by: 
Nicola J Sorrell - Effective Accounting 
Founder | Xero Champion | IR35 Expert 
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