This year’s Spring Statement was one of the most important yet. With costs rising sharply across all sectors, and the war in Ukraine still ongoing, it’s an incredibly uncertain economic climate at present.
Chancellor Rishi Sunak made a number of key announcements in his statement on Wednesday 23rd March 2022. Whilst the focus remained on the personal cost of living, we’ve unpicked the most relevant points for the self-employed.
The economic outlook
Firstly, it’s valuable to look at the country’s financial situation in general.
Overall, there’s a lower growth outlook for 2022 than previously predicted – it was forecast at 6% before, but this is now at 3.8%. However, it should be noted that unemployment is at 3.9% less than prior to the pandemic – and it’s likely to decrease further.
Having said this, war will have an impact on the cost of living. According to The Office for National Statistics, inflation has risen to 6.2% – the fastest for three decades. It’s anticipated to rise further, to an average of 7.4% for 2022, then to 8.7% by the end of the year.
Taxes
It’s good news for those impacted by the fuel crisis, as fuel duty will be reduced by 5p per litre until March 2023.
National Insurance thresholds will increase by £3,000 – to the same level as the Personal Allowance (£12,570). Sunak revealed this was a tax cut of £330 for individuals, and £6bn overall for 30m people. It’s the biggest increase in the basic rate threshold ever, and the largest single personal cut in tax in more than a decade. Though, with a freeze on Income Tax rates since April 2021 (until April 2026), any pay rises could push people into higher tax bands.
In addition, Sunak vowed to reduce the basic rate of Income Tax from 20p to 19p in the pound before the end of this Parliament (2024). Although this will be a £5bn saving for 30m people across the nation, it’s not immediate, nor is it guaranteed.
Business rates
There wasn’t much specifically targeted at businesses in the Spring Statement. Many were announcements made in last year’s Autumn Budget – like the annual investment allowance.
However, Sunak did disclose that there’ll be a cut to tax rates to business investments in this year’s upcoming Autumn Budget. This will require a consultation with companies over the summer, discussing ideas to support people and capital.
To help small businesses now, the Employment Allowance will rise to £5,000 in April 2022, offering tax relief to smaller businesses’ National Insurance payments. This is a tax cut valued up to £1,000 for half a million SMEs. Though, some employers argue this doesn’t achieve much given the significant surge in wages they’ll have to deal with to keep up with inflation.
Manage financial changes with Bright Ideas Accountancy
Many of the announcements in the Spring Statement will affect your business, as well as you as an individual and any employees you may have. So, if you need help or guidance related to it, or just some support with the numbers in general, don’t look any further than Bright Ideas Accountancy.
From advice on financial planning, to VAT returns and bookkeeping, our expertise is yours to draw on. Book a free consultation by calling us on 0161 669 4221 or emailing info@biaccountancy.com.
