Spring Statement: Chancellor delivers tax cuts, promises more in August24/03/2022
Chancellor Rishi Sunak gave his Spring Statement this week, combating persistent high levels of inflation with tax cuts and financial support for individuals and small businesses. Additionally, he promised to cut taxes for businesses in his Autumn budget after a period of consultation in the coming months. Here are the main points from Mr. Sunak’s address:
Fuel duty will be slashed by 5p per litre, and remain so until March 2023. This will help individuals and businesses combat higher prices at the pumps caused by persistent inflation challenges that have been exacerbated by the war in Ukraine.
The Chancellor has also announced that the income threshold for people to start paying National Insurance will be increased to £12,570 in July (allowing time for IT systems to be adjusted to the change). This, according to Mr. Sunak, will result in an “effective tax cut” for 70% of workers.
In addition to NI changes, Mr. Sunak announced a 1% cut to the basic rate of income tax, from 20% to 19%, which should help workers across the UK cope with rising cost of living.
Small businesses were given support with the announcement that the Employment Allowance (which relieves their NI payments) will be increased from £4,000 to £5,000, and families were given support with an additional £500 million for the Household Support Fund. Both measures begin in April 2022.
Mr. Sunak was clear that the challenges facing Britain are the same as those facing many countries around the world. He added that the policies announced were a “significant intervention” and that the government was “on people’s side at this difficult time.”
British businesses, however, will be most interested in a policy which is yet to be announced – Mr. Sunak’s promise to slash business taxes in the Autumn. The Chancellor has stated that he wishes to spur innovation and investment by replacing the “super deduction” tax break on capital spending that ends next year, and will consult with businesses on the best way to accomplish such a goal. The result will be announced when he delivers his Autumn Budget.
He said: “Once the super-deduction ends next year, our overall tax treatment for capital investment will be far less generous than other advanced economies. We’re going to fix that.”
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