With the cost of living crisis and inflation being in focus for both individuals and small businesses, there was a keen interest in what Rishi Sunak would announce in the latest Spring budget statement. In recent years the Spring statement has been mainly focused on updating on the UK economy. However, there was an expectation that the chancellor would make some much needed tax announcements to help the UK cope with the current rise in inflation which the Bank of England expects to reach 8% this Spring.
There wasn’t a huge number of announcements but there were a few key points that would help many employees, self-employed and small businesses, such as the increase in the National Insurance threshold and the increase in the Employment allowance.
As contractor accountants, we’re taking a closer look at some of the key announcements below:
National Insurance
The tax free allowance that individuals receive before paying National Insurance will increase by around £3,000, taking the tax free amount to £12,570 in line with the personal allowance. This will give some relief to many with the increase in the National Insurance rate of 1.25% still going ahead and will mean many pay lower National Insurance contributions next tax year.
Employment Allowance
The employment allowance is a relief to employers that have eligible employees. Currently, the first £4,000 of employers NI will not be due as it is covered by this allowance. The chancellor announced that this will be increased to £5,000 from April 2022, giving a further tax saving to many small businesses with employees.
Fuel Duty
As the cost of fuel and energy has continued to increase in recent months and there was some pressure on the government to provide some assistance. Although there was some disappointment that more wasn’t done to help with energy costs, there was some help for motorists with the Chancellor announcing that fuel duty will be cut by 5p per litre immediately.
VAT on Energy Efficiency Improvements
In a further attempt to assist with the cost of energy increases, the Chancellor handed out a reduction in making energy efficient improvements. This measure would bring the VAT rate down from 5% to 0% on installing solar panels, heat pumps and home insulation.
Income Tax
In a surprise move, it was announced that the basic rate of income tax will be reduced from 20% to 19%. This tax cut will be welcomed for individual taxpayers but will only come into effect from April 2024.
At Gorilla Accounting, we can help you make sense of the Budget and of what it means for your business, so please don’t hesitate to get in touch with us today on 0330 024 0406 for more information.
