Businesses have been offered minimal support with rising costs in the Spring Statement, according to MGI Midgley Snelling LLP, but many individuals 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 Weybridge-based accountancy firm, MGI Midgley Snelling LLP.
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 MGI Midgley Snelling LLP 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 Sarah Squires, Partner at MGI Midgley Snelling LLP.
“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.”
Sarah said that this support would be a “drop in the water” given the higher National Insurance bill that employers faced from April and increases in other employment costs, such as the National Minimum and Living Wage.
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, MGI Midgley Snelling LLP questioned how much they would alleviate the cost-of-living crisis.