Marginally beneficial to small companies and lower paid individuals
The Spring Statement (effectively a mini budget) reduces the tax burden slightly on lower paid and smaller companies. The most relevant announcements to our clients are an increase in the tax-free allowance for National Insurance (beneficial to businesses and employees) and an increase in the Employment Allowance, which adds £1,000 to business profits. These measures, at least for very small businesses offset the increase in National Insurance. The proposed increase in the Corporation Tax rate for larger companies unfortunately remains. However, there are some signs that the Government is reconsidering the future tax landscape and raises the possibility of lower taxes and higher investment incentives.
Summary of policy decisions
The table below summarises the policy announcements that we think will be most relevant to our business clients.
Summary of measures announced at the Spring Statement
|Increasing National Insurance thresholds||NI Primary Threshold and Lower Profits Limit, for employees and the self-employed, will increase from £9,880 to £12,570||1 July 22||Yes|
|Reducing Class 2 NICs payments for low earners||Self-employed people with profits lower than the Small Profits Threshold or Lower Profits Limit will not pay class 2 NICs||1 April 22||Yes|
|Increasing Employment Allowance||Employment Allowance will increase from £4,000 to £5,000/year||1 April 22||Yes|
|Reducing basic rate income tax||Basic rate Income Tax will reduce from 20% to 19%||1 April 24||Yes|
|Temporary cut to fuel duty||Cut the duty on petrol and diesel from 5p per litre for 12 months (£0.5795/litre duty on petrol reduced to £0.5295/litre)||23 March 22 to 22 March 23||Yes|
|VAT relief for energy saving materials||New items like wind and water turbines will be eligible for lower VAT||April 22||Yes|
|Green reliefs for Business Rates||Business rate exemptions for: eligible plant and machinery used in onsite, renewable energy generation and storage, etc||1 April 23 until 31 March 35||No but implementing the measure earlier|
|R&D tax relief extended||Cloud computing costs associated with R&D, will qualify for relief & relief will be extended to some overseas activities||1 April 23||Yes|
|Extension of £1m Annual Investment Allowance||£1 million level of the Annual Investment Allowance extended||To 31 March 23||Yes|
Indications for the future
The Statement also includes a section called “Tax Plan” which gives an indication on the Government’s thoughts for the future. I have pulled out a couple of quotes from this section, which I found particularly interesting, and added some commentary.
“The government wants to create the conditions for the private sector to invest more, train more and innovate more. This includes cutting and reforming taxes to support these aims.”This seems to be inconsistent with the 2021 Budget in which an increase in tax to 25% was implemented. See here.
It’s not clear where this will lead given the ending of the super allowance and the ups and downs of the Annual Investment Allowance
Chat on investment …. “The UK needs to build on this momentum to encourage stronger growth in business investment and hence productivity. To achieve this, the government will cut and reform taxes on capital investment to help drive higher growth.”
“High skilled immigration plays a disproportionate role in driving innovation; around half the UK’s fastest growing businesses have at least one non-UK-born co-founder, and non-UK born staff account for around 40% of academic staff in engineering, technology, and biological, mathematical and physical sciences at UK universities. That is why the government is focused on creating a visa regime that will attract highly skilled and entrepreneurial individuals from across the world.”Probably focussed on PHDs and the like and will have little impact on most small businesses.
“The government recognises that employers have frustrations with the way that these Apprenticeship Levy funds can be spent within the apprenticeships system and is delivering a suite of improvements to address these. As part of this, the government is looking at how more flexible apprenticeship training models can be supported, while ensuring apprenticeships remain a high-quality training route for employees of all ages and stages of their career.”Indicative of more flexible support for employees who take people on and train them.
Feel free to call me if there is anything you would like to discuss. You can see the Spring Statement documents here.
Marginally beneficial to small companies and lower paid […]