The Chancellor of the Exchequer, Rishi Sunak, announced the Spring Budget in the House of Commons on Wednesday 23rd March 2022. With many experts and analysts predicting a toned down ‘mini-budget’, it pretty much transpired to be a low-key budget compared to previous years, however there were plenty of talking points to go over.
As living standards have plummeted to the worst on record, according to the Office For Budget Responsibility (OBR), this budget was going to be heavily scrutinised particularly in terms of the effects on lower and middle income individuals and families.
Here is a summary of the main talking points outlined by the Chancellor…
Economic & Public Outlook
The Chancellor opened his Budget speech calling on the terror and atrocities in Ukraine. He stressed that the use of economic sanctions on Russia is working and will continue, however this will come at a cost for the taxpayer.
The annual inflation rate was 6.2% in February, and is likely to average 7.4% for the rest of this year, whilst the government is forecast to spend £83bn on debt interest in the next financial year, the highest on record.
The unemployment rate currently stands at 3.9%, which it is predicted to be even lower now, as well as every forthcoming year of the forecast. The total number of people employed between now and 2027 is expected to be 400,000 lower than before the pandemic, however this is largely attributed to early retirements, long-term sickness, as well as a decreasing number of workers arriving in the UK.
Despite the Chancellor prophesying that the future looks bright, unfortunately the present for many households looks extremely bleak.
Energy & Fuel Rises
Many late predictions pointed towards a slash on fuel duty tax, following in the footsteps of many European countries who have aimed to help out the public amidst uncertainty over oil related to the war in Ukraine. The Chancellor announced a modest 5p cut per litre, which will remain in force until at least March 2023. The scale of help that a 5p cut per litre will bring remains questionable, however the pressure to announce a fuel duty tax came to fruition.
Mr Sunak also announced a complete VAT cut for homeowners installing energy efficiency materials such as solar panels, insulation, and heat pumps. The VAT previously stood at 5%, with the Chancellor optimistically estimating the energy savings would equate to £300 per year for a household who choose to install energy efficiency materials.
Local authorities will get receive a further £500m for the Household Support Fund from April, which in turns results in a £1 billion total fund package aimed at helping vulnerable households with rising living costs.
Tax & Threshold Cuts
With many people calling for the National Insurance increase to be scrapped, the Chancellor chose instead to increase the income threshold for at which point people start paying National Insurance. This will rise to £12,570 in July, which was claimed to save employees over £330 a year. The scrapping of the NI increase was incredibly hopeful, especially with the increase coming into effect in a matter of weeks.
One of the headline announcements, part of Mr Sunak’s ‘new tax plan’ came in the form of pledging to cut the basic rate of income tax from 20p to 19p in the pound before the end of this Parliament. This buoyant announcement has been criticised by many already, with the pledge not a confirmation that this would actually transpire but rather a not so subtle nod as to when the next general election will be.
Outlining his focus on smaller businesses accelerating again after the turmoil of the pandemic, Mr Sunak announced an increase of £1000 to the Employment Allowance, which will be £5000 starting from April.
We hope this has outlined to you the key announcements of the UK Spring Budget 2022 made by the Chancellor Rishi Sunak. If you require any further information on any government announcements, or anything accounting related for that matter, please don’t hesitate to get in contact with us at Nordens where one of our trusted advisors would be happy talking you through your query.