Employment taxes

The biggest surprise announcement was an increase in the National Insurance Primary Threshold from £9,880 to £12,570. This rise will align the threshold with the personal allowance, meaning employees will start paying National Insurance Contributions (NICs) and income tax at the same level of earnings.  However, that won’t be the case straight away. To give systems and software time to update, the increase will only take effect from 6 July 2022. That means that two different NIC thresholds will apply during tax year 2022/23.

Whilst the increased threshold will (eventually) be good news for employees, the news is less positive for employers. The point at which employers begin to be liable for secondary Class 1 NICs will not be increased, and will remain at the previously announced level of £9,100. Employers will therefore become liable to pay NICs earlier than their employees.

There is some good news for employers though, as the employment allowance will be increased from £4,000 to £5,000 from April 2022. The Government estimate that this will benefit around 495,000 businesses, including around 50,000 who will be taken out of paying Employer NICs in 2022/23 and also the Health and Social Care Levy (when introduced in 2023) entirely.

Future income tax cut?

Another surprise announcement by the Chancellor was that, from April 2024, the Government intends to cut the basic rate of income tax from 20% to 19%.

This cut will apply to the basic rate for non-savings non-dividend income (i.e. earnings, trading and property profits), as well as the savings basic rate. It will not however apply to dividend income. The reduction in the non-savings-non-dividend income basic rate will also not apply in Scotland, which continues to set its own rates and thresholds.

Apprenticeships and training

The Government is concerned that the UK is lagging behind other countries when it comes to adult technical skills, with only 18% holding vocational qualifications (a third less than the OECD average).

In the Spring Statement, the Government acknowledged employer frustrations regarding the way that Apprenticeship Levy funds can be spent. To address this, they will look at how more flexible apprenticeship training models can be supported. They will also look at whether further changes to the tax system (including the Apprenticeship Levy) are needed to encourage employers to spend more on employee training.

Corporate tax

Whilst no changes to corporation tax rates or allowances were announced at the Spring Statement, the Government did give some idea of the areas it will be looking at in the coming year.

These include:

• R&D relief –changes to refocus relief on the UK and to allow companies to claim relief for the costs of cloud computing and data costs will go ahead as previously announced. These will be coupled with a further review of R&D tax reliefs, looking in particular at making the large company scheme more attractive and tackling abuse of the small / medium company scheme.
• Capital investment – the Government will consider reforms to support business investment through the tax system. These may include increasing the permanent level of the Annual Investment Allowance (AIA), increasing writing down allowances, introducing new first year allowances, or even allowing full expensing.

It is expected that consultations on the above areas will be launched later this year.

Indirect taxes

In response to rising fuel prices, a 12-month temporary cut to fuel duty of 5p per litre was introduced with effect from 6pm on the day of the Spring Statement (23 March).

The VAT rate applicable on the installation of energy saving materials (ESMs) is reduced from 5% to 0% from 1 April 2022 and will stay at that rate until 31 March 2027.  Wind and water turbines will be brought within this new zero rate, and some of the previous eligibility conditions removed. This change will not however apply in Northern Ireland.