Spring Statement Update

4 minutes to read

Just over five years ago saw the introduction of the Spring Statements with the narrative that ‘The Chancellor will not make significant tax or spending announcements at the Spring Statement, unless the economic circumstances require it.’

Given the current economic circumstances it is therefore not surprising that the 2022 Spring Statement included some significant announcements.

For businesses in Great Britain


Employment Allowance: This is a Class 1 NIC relief that allows certain businesses and charities (including community amateur sports clubs) to reduce their employers Class 1 NIC liability. Generally, business will be eligible where their Class 1 liability is below £100,000. It increases from 6 April 2022, to £5,000 (previously £4,000).

Fuel duty: Fuel duty on petrol and diesel has been cut by 5p per litre, which came into effect on 23 March 2022 and will last 12 months. This will be beneficial for business motoring, although with sharply rising costs, it may be necessary to review business motoring strategy. For example, unincorporated businesses, could review any decision to claim flat-rate expenses rather than a percentage of total running costs in their accounts. Employer arrangements with employees may also need consideration.

Energy saving materials (ESMs) zero rate of VAT: Currently, only some ESMs attract reduced rate VAT treatment however, following the Spring Statement the Government have introduced a zero-rate of VAT for the installation of certain types of ESMs in residential accommodation. This will only be available until 31 March 2027 and applies from 1 April 2022. The Spring Statement also brings wind and water turbines back into scope of zero-rate VAT permanently.

Zero-rate VAT for businesses in Northern Ireland

The ESM provision does not directly apply to businesses in NI due to unique post-Brexit VAT rules. There is therefore, no change to the VAT rate on installations or the list of qualifying goods but there has been an adjustment to the funding that is provided to the NI Executive.

Capital allowances: Unfortunately for some businesses April 2023 sees the end of some very generous tax reliefs. Both the £1 million limit for the Annual Investment Allowance  and the super-deduction regime, which provides temporary enhanced first year capital allowances for companies, , will then finish. However, there may be hope as the Spring Statement suggests a variety of potential directions for future policy.

Research and development (R&D): The government has confirmed that all cloud computing costs associated with R&D, including storage, will qualify for relief, and further clarified the position with regard to expenditure on overseas R&D activity.  Similarly, there was clarification that pure mathematics is a qualifying cost. It is expected that these changes will take effect from April 2023. Considerable further detail is still forthcoming, however.

For individuals


Income tax: It was announced that the basic rate of income tax is set to fall to 19% from April 2024. However, note that with devolved powers, the position is different for Scottish taxpayers, and potentially also for Welsh taxpayers, depending on the next decisions of the Welsh Assembly.

Consideration has been made for the knock-on consequence for charitable gifts made under the Gift Aid scheme, as this will reduce the amount that can be claimed back by recipient charities. The government has therefore proposed a three-year transition period, where income tax basic rate relief remains at 20% for charities. This will run until April 2027.

National Insurance (NI): Substantial changes have been made to NI. In addition to the Employment Allowance for employers there is also change for the self-employed, and company directors.

For the self-employed, there is an increase in what is called the Lower Profits Limit for Class 4 NICs. This will align it with the personal allowance for income tax, which is set at £12,570 per annum. It should be noted that though NICs will change from 6 July 2022, Class 4 is calculated on an annual basis, so the full effect of the Chancellor’s announcement won’t be felt until the following tax year. For the year to 5 April 2023, the Lower Profits Limit is £11,908.

From 6 April 2022, Self-employed Class 2 NICs will not be payable on profits between the Small Profits Threshold and the Lower Profits Limit, although NI credits for state pension purposes will still be given. Government figures suggest this is equivalent to a tax cut of up to £165 per annum for around 500,000 individuals, though obviously this will only impact those with relatively low levels of self-employed income.

Company directors who have an annual pay period will have a Primary Class 1 Threshold of £11,908 for 2022/23 and £12,570 for 2023/24.

If you have any further questions / would like to discuss the options for your business please do not hesitate to get in contact with one of our experts either via the contact us page or via phone 0116 254 9262.