Ian Haynes, Tax Director, Edinburgh
It’s probably fair to say that the main thrust of the 2022 Spring Statement was tax cuts. On the day that inflation was announced at a 20 year high of 6.2% with a forecast of upwards of 8% expected, Rishi Sunak had to do something to keep the people happy. His answer was the Tax Plan.
The worst kept secret of the mini-Budget was the planned reduction in fuel duty. At 5 pence per litre and effective from 6pm on 23 March, this is a valuable saving that will have a direct impact for anyone who drives a petrol or diesel car. Many such drivers may have found themselves unable to fill up their car at un-manned pumps in recent weeks, as the £99 maximum spend is currently not high enough due to soaring prices; perhaps this will now change? My big question on this has to be – ‘what will happen in March 2023 when this reduction ends?’.
Another helpful tax cut was to reduce the 5% VAT charge on insulation materials, solar panels, heat pumps and so on down to 0%. VAT registered traders will absorb these changes, but will this be sufficient to encourage the population to invest in what are still generally expensive green energy solutions?
While the incoming Social Care Levy will remain, he announced that the national insurance contributions (NICs) threshold would be increase by £3,000 to bring the income tax and NIC thresholds in line. This has been speculated about for many years, so is welcomed, but taken with the increased NIC from the Social Levy, the real impact is likely to be minimal. It’s also note-worthy that this will only apply from July 2022, and NICs are not cumulative, so unless things change, there will be no adjustment made from April to when this takes effect.