The Chancellor has presented the government’s 2022 Spring Statement, stating, “We are on people’s side at this difficult time.” Below are four areas announced that are relevant to businesses. I’m not sure how many of us will benefit from solar panels or wind turbines, but at least this is a positive move to address environmental issues.
What do businesses need to know about Rishi Sunak’s Spring Statement?
1. National Insurance threshold raised
The current National Insurance threshold (2022-23) is £9,880 for the tax year 2022–23. This is the amount of income you can earn before paying national insurance. This threshold is now increasing to £12,570 as of July 2022.
The increase in the threshold also applies to the new social care levy (1.25% employee and employer contribution), which is introduced on April 6, 2022. Meaning the levy will not be charged until the threshold is reached.
The new national insurance threshold will be in line with the annual personal allowance.
While there will be an annual saving on national insurance, this will be eroded by the introduction of the social care levy.
Earnings above the primary threshold will have a national insurance charge of 13.25% (including a 1.25% social care levy). The effective annual savings on the £2,690 threshold increase is £356.
I personally think this is a long-awaited change to help simplify the current system, providing one threshold across national insurance and tax (fingers crossed, this will continue to stay aligned).
Side note: The chancellor has also proposed a change to the basic rate for income tax from 20% to 19%; however, this change is not imminent and has been announced as a change by the end of parliament in 2024. Watch this space!
2. Zero rate VAT for solar panels
With the hope of addressing the energy crisis, the chancellor has confirmed the following will now be zero-rated for VAT:
- Solar panels
- Wind turbines
If you are thinking of having energy-saving materials installed, these will now be 0% VAT rather than the current 5%.
I’m not sure how many of us will have our own wind farm, but it’s out there for all to explore!
3. Fuel duty cut by 5p per litre
From 6pm on March 23, 2022, fuel duty will be cut by 5p per litre. This cut will remain in place for the next 12 months. The Chancellor has claimed this to be the “biggest cut ever” and means a one-car family will save on average £100.
4. Employment Allowance
The employment allowance is currently £4,000; this has now been set to increase to £5,000 from April 2022. This means eligible businesses will be able to claim a greater reduction on their secondary Class 1 National Insurance liabilities.
Expert guidance on navigating the Spring Statement
If you have any questions as to how the items in the 2022 Spring Statement may impact your business, please get in touch. At Atek, we are committed to supporting businesses to get control of their finances and achieve their goals. We would welcome the chance to talk with you about how we can help.