Businesses have been offered minimal support with rising costs in the Spring Statement, according to Davis Grant, but many individuals will receive a boost thanks to changes to National Insurance.
The Chancellor faced a challenge as he entered Parliament to deliver his latest Spring Statement, said London-based accountancy firm, Davis Grant.
Rapidly rising inflation, a weakened economic forecast and unparalleled international uncertainty made his choices seem limited.
Nevertheless, he surprised Parliament by delivering an unexpected tax plan. He began his Spring Statement by declaring a 5p cut to fuel duty for one year, before following with the announcement of a £3,000 increase to the National Insurance Primary Threshold and Lower Profits Limit – two measures Davis Grant said would support the average worker.
“The increase to the National Insurance threshold that will take place in July brings this in line with Income Tax and will reduce the amount of National Insurance Contributions (NICs) that millions of people pay,” said Neil Driver, Director at Davis Grant.
“This should help to soften the blow of the upcoming Health and Social Care Levy, which sees National Insurance Contributions (NICs) increase by 1.25 percentage points from April.
“For employers, the news is less positive as the increase to the threshold will not benefit them as employer’s NICs are set by the secondary threshold.
“Employers weren’t totally forgotten though, as the Chancellor did increase the Employment Allowance, which reduces eligible employers’ annual National Insurance liability, from £4,000 to £5,000.”
Individuals will also benefit from a cut to the basic rate of income tax from 20 per cent to 19 per cent from April 2024.
“Alongside the measures focused on individuals, the Chancellor also announced his intention to reform other tax reliefs in the Autumn Budget later this year with a focus on ‘people, capital and ideas’, importantly improving access and funding via the R&D tax credit scheme through further reforms that could offer a £5 billion boost by 2024.”
Although many individuals and businesses will benefit from the tax cuts in the Spring Statement, Davis Grant questioned how much they would alleviate the cost-of-living crisis.