Chancellor Rishi Sunak’s Spring Statement today was tempered against a backdrop of the war in Ukraine, the cost-of-living crisis, and a national debt that is now greater than the size of the UK economy.
In the run-up to today’s Statement the Chancellor had managed expectations that there would be no ‘quick fix’ and he held his ground today. Despite the social and political pressure, including from the Prime Minister, the Chancellor resisted calls to defer the 1.25% National Insurance (NIC) increase, but instead announced an increase of £3,000 to the NIC threshold taking effect from July. This threshold increase is neatly targeted at lower and middle earners, with those earning less than £41,400 being better-off when factoring in the NIC increase from April.
In an unconventional move for a fiscal update, Rishi Sunak pre-announced a 1% cut to the basic rate of Income Tax from April 2024, and it would not be surprising if a further 1% cut was announced at a future Budget before the next General Election.
In a widely expected and welcome move, fuel duty will be cut by 5p immediately for a temporary period of 12 months. However, there was no further support to address rising energy prices following last month’s £9 billion energy rebate package.
There wasn’t much for businesses other than a £1,000 increase to the Employment Allowance, a small broadening of the Research & Development tax regime and plans to reform business taxes to encourage investment. It’s worth remembering that the Corporation Tax rate increases to 25% from April 2023 and therefore such measures are likely to be of neutral effect.
The Chancellor welcomed his Tax Plan to fulfil his ambition to be a ‘low tax’ Chancellor, but there is currently little in the plan than the minor measures announced today. No doubt the Government will want the Chancellor to develop the plan further over the remainder of this Parliament.
Overall, it was the Spring Statement message that the Chancellor had promised, with very few measures to address the concerns of businesses, individuals, and the economy as a whole.
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