With economic recovery at the top of everyone’s minds, we were all eager to hear Chancellor Rishi Sunak’s Spring Budget Statement. Sunak stated that a stronger, more secure economy was the right course for the country and detailed how to get there. Here’s a rundown of how some of the topics might affect you.
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With the current situation with Russia, it’s possible that we might not be entirely in control of our own recovery and the chancellor warned that we should be prepared for the economy and public finances to get worse before they get better.
Cost of living
The Office for Budget Responsibility is forecasting a 7.4% average inflation rate this year. In an effort to offset some of this burden, fuel duty was cut for only the second time in 20 years. Worth £5bn, for the next 12 months, fuel duty has been reduced by 5p per litre. The government is also offering to waive the usual 5% VAT rate for households installing solar panels, heat pumps, or insulation. Additionally, he will double the government’s household support fund to £1bn.
In order to fund health and social care, the 1.25% increase in National Insurance contributions will move forward as planned. Sunak did, however, announce that this year he would be increasing the threshold by £3,000, quite the leap from a previously planned rise of £300, but a welcome change, especially for middle-income families. The National Insurance contributions threshold is now on par with the personal income tax allowance of £12,570. Chancellor Sunak is calling it a £6bn personal tax cut for 30 million people, and the largest single personal tax cut in ten years.
There will be no immediate cut to the basic rate of income tax, Sunak stating that a tax cut right now would not be wise, not with the current state of the economy. However, it is set to be reduced from 20% to 19% in 2024. The tax cut, which would be the first to income tax in 16 years, is not yet a priority, and the chancellor is hoping that it will be a better fit in a few years.
There is some relief for small businesses, with the Employment Allowance set to increase from £4,000 to £5,000 from April. This is the threshold for employer National Insurance payments, and includes the Health and Social Care Levy.
Speak to us
If you would like to discuss what the announcements from the Spring Budget Statement might mean for you or your business, don’t hesitate to reach out to your financial adviser at Dental & Medical Services today.