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March 23, 2022

UK Chancellor’s Spring Statement: Industry reactions

Kevin Sefton, CEO of personal tax app untied, comments on UK chancellor Rishi Sunak’s 2022 Spring Statement: “A key tax announcement was the commitment that national insurance thresholds will align to the income tax threshold, and explicitly “to fully equalise the NIC and income tax thresholds so that from this July people will be able to earn £12,570 without paying a single penny of income tax or national insurance.”

“In his statement, the chancellor only mentioned the impact on employed people, but the strength of these words implies that it will apply to everyone who pays national insurance including self-employed.

“If carried through, this also invites the potential to significantly reduce the administration of self-assessment for lower earning self-employed people. This is important with the introduction of a new way of tax reporting from 2024 called Making Tax Digital for Income Tax.

“We look forward to seeing details, and what it also means for voluntary contributions which self-employed people can make in order to protect their access to a pension on retirement. These are a complication for many who are new to the tax system.

“We also note that national insurance is already due to rise from April by 1.25% (which works out at 2.5% for many employed people as it applies to both employer and employee contributions); in due course this will become the health and social care levy – though those arguing for simplicity may prefer not to add another type of tax and rules that go with it.”

Fuel prices

“The 5p cut in fuel duty will be widely welcomed and we expect that the 5% VAT reduction on the installation of exchanges and solar panels will help as the country moves away from gas boilers. We note that VAT on domestic electricity even when generated from entirely renewable sources remains at 5%.”

EY on the Spring Statement

“Rishi Sunak clearly considered that the lack of a formal Budget was no reason to avoid making changes that would have made many a Chancellor proud – eleven measures which between them encompassed immediate tax cuts, promises of further incentives and cuts in the Autumn and, to top it off, the ultimate rabbit from the hat of a cut in the income tax rate. There was not a single tax rise in sight.

“The immediate cuts were focused on today’s sources of pain – that of fuel duties – matched with commitments to allow the Chancellor to maintain credibility in the journey to Net Zero.  Beyond this, the measures were few but targeted.

“However, the Chancellor spent much of his speech in design mode, setting out his aspirations and announcing the publication of his 11 page “Tax Plan”, replete with potential costed announcements. This is a positive step forward, providing a forum for engagement, and avoids the criticisms of the previous business tax roadmap, which was more of a travel journal covering the past than a vision of the future.

“So, today the Chancellor not only provided some “jam” today but reached out for the recipes to ensure that he can deliver cakes in the real Budget in the Autumn.”

Azets: Missed opportunity to be bold

Praveen Gupta, national head of tax at Azets, the largest regional accountancy firm and business advisor to SMEs, reacts to Chancellor Rishi Sunak’s Spring Statement: “Following widespread speculation that the Chancellor would reduce tax on fuel and energy, there is some good news for individuals and businesses in the decision to cut fuel duty by 5p per litre and incentivise investments in green energy. However, I believe there was scope for the Government to be bolder and offer even greater financial support, given the rate at which prices are rising.

“Whilst he did not reverse the planned increases to National Insurance contributions (NICs), which would put an even greater squeeze on families and UK SMEs, the announced £3,000 increase of the National Insurance threshold will offer some relief to employees. Businesses had hoped for a complete U-turn on the 1.25% NICs increase, which might have been achieved with the Government having received record tax receipts across the board in 2021.

“We welcome the Chancellors pledge to cut tax rates on business investment in his Autumn Budget, as SMEs continue to have a significant role in driving the UK’s economic recovery from the pandemic, despite ongoing disruption to supply and rising costs. However, existing schemes such as the super-deduction have so far been underutilised and we would encourage the Government to extend incentives for investment in key areas such as R&D, innovation, and technology sooner rather than later.”

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