Sunak’s budget statement holds some surprises

“After presenting two budgets in 2021, in which the Chancellor outlined extensive details on the rates and tax rules that will apply until April 2026, the spring 2022 statement issued last week was to provide an update. on the economic situation and revising forecasts without providing anything significant on However, the current cost-of-living crisis and broader world events have provided Mr. Sunak with a backdrop to present more tax changes than what he expected. one might have expected, with announced changes to fuel taxes, VAT on energy efficient materials, NIC thresholds and even a proposed income tax cut for 2024.

fuel tax

A 5p per liter reduction in fuel duty has been introduced, reducing duty from 57.95p to 52.95p for 12 months, but with record prices for petrol and white diesel there is little likely that lowering duties will make a material difference. A proportional reduction in duties on red diesel will also apply, but should not exceed one penny per litre.

VAT on energy efficient materials

The reduced VAT rate of 5% has applied for many years to the supply of the installation of energy saving materials in qualifying residential properties. The Chancellor has now extended the scope of this measure to more energy-efficient technologies, and from April 2022 the supply will be VAT-free rather than reduced-rate. With many rural businesses facing significant costs on the housing stock to meet EPC standards, this is a useful and welcome step.

National insurance

The thresholds above which the NIC becomes payable by employees are set to increase in July 2022 to align with the personal income tax abatement (£12,570). This will have a knock-on effect on the figure above which the self-employed pay a class 4 network card on business profits (£11,908).

Small employers will benefit from an increase to £5,000 in Employment Allowance, reducing employers’ NIC from 6 April 2022.

Despite numerous calls for the Chancellor to reconsider the introduction of the Health and Social Care Levy in April 2022, she is forging ahead, adding 1.25% to NIC bills for employees, employers and independent workers.

Capital allocations

Last year’s budget introduced improved allowances for qualifying plant and machinery expenditure between April 1, 2021 and March 31, 2023. Limited companies can claim the so-called “super-deduction”, providing allowances from 130% on investments in new plant and machinery.

The 100% Annual Investment Allowance (AIA), which is available to LLCs and many unincorporated businesses, continues to be available for eligible expenditure up to £1m until as of March 31, 2023.

Income tax

Income tax rates and in-work earnings benefits are devolved in Scotland, so care should be taken when reading headlines about the Chancellor announcing income tax cuts or tax freezes. personal allowances. The interaction between Scottish income tax brackets and those in the rest of the UK, which also apply to unearned income for Scottish taxpayers, can be complex. Needless to say, accountants and tax advisers will have their work cut out to calculate the impact for taxpayers as the Scottish and UK rates/bands become increasingly divergent!

Dorothy H. Lewis