In the Spring Statement 2022, Chancellor Rishi Sunak provided the country with an update on the overall health of the economy, in which he promised to deliver greater economic security for the UK, accelerate growth and productivity, and make sure the proceeds of that growth are shared fairly.
The Chancellor explained that, while events in Ukraine mean the outlook for the economy is more uncertain – the OBR forecasts that the economy will grow by 3.8% in 2022, compared to 6% predicted at time of the budget last October – the government can provide targeted help by building a stronger, more secure economy for the UK.
From April, the Employment Allowance will increase to £5,000 – a new tax cut worth up to £1,000 for about half a million small businesses.
Arguing that ““something is not working” with UK investment in productivity, Sunak also announced changes to R&D tax credits. He stated that the generosity of reliefs for business investment would be increased to boost UK productivity.
The Chancellor pledged that the government would cut tax rates on business investment at the autumn budget.
In a surprise move, Rishi Sunak told MPs that the basic rate of income tax will be cut from 20p to 19p in the pound by the end of this Parliament in 2024, equating to a £5bn tax cut for over 30 million people. This will be the first cut in income tax for 16 years.
Sunak said the planned 1.25 percentage point rise in national insurance contributions must remain as a “dedicated funding source” for health and social care.
However, he announced he would increase the National Insurance threshold by £3,000 this year, up from a planned rise of £300. This balances the national insurance contributions threshold with the personal income tax allowance of £12,570, and will be the largest single personal tax cut in a decade.
The chancellor announced that he is publishing a new tax plan which will see “a principled approach to cutting taxes” to help ease the rising cost of living.
This plan includes cutting Fuel Duty on petrol and diesel by 5p per litre across the country, a measure that will remain in place till March 2023.
He also revealed that, for the next five years, homeowners having energy saving materials like solar panels, heat pumps, or insulation installed will pay zero VAT. Additionally, the government will double the Household Support Fund with an extra £500m; with the aim of ensuring the most vulnerable families get support with their food, energy and water bills.