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Spring Budget Statement 2022

The Chancellor has pledged to cut the basic rate of income tax by the next general election in 2024. This announcement was not anticipated beforehand. Tax & estate planning Partner, James Austen, comments on this and the so-called “Tax plan” outlined:

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Published 23 March 2022

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“To my mind, the potentially more important announcement was that of the so-called “Tax Plan*”: tax professionals have been asking the Treasury for this for years. Unfortunately, rather in common with the precipitate “income tax cut” announcement, the Tax Plan actually published today is really nothing of the sort: apart from the sections on today’s announcements, it is mostly a loose wish-list of broadly-described aspirations, with none of the intellectual or fiscal clarity one would hope to see. That is a real missed opportunity.

It is possible that the Chancellor made this announcement before the document itself was ready for publication. In which case, the Treasury will hopefully be working on a new version of the Tax Plan between now and the Autumn Budget Statement, and that the document published then will better reflect what the Chancellor announced today. In particular, the Tax Plan should include clear and precise statements about Government plans for the future trajectory of tax policy, with appropriate periods for consultation before changes are implemented.

Most importantly, there should be no more unwelcome and disruptive changes to tax legislation without prior notice.”

*The Tax Plan policies outlined by the Chancellor include:

  • A 5p per litre cut in fuel duty for at least the next year. Fuel duty will go down from 57.95p per litre to 52.95p, resulting in an annual saving of £200 for the average van driver, according to Treasury estimates.
  • A time-limited VAT cut on the cost of home insulation, solar panels and heat pumps to encourage the installation of energy-efficient home improvements. VAT will drop to zero from April 2022, having previously been as much as 20% in some instances.
  • A £3,000 rise in the National Insurance threshold to £12,570 from July 2022. This will result in a tax cut of £330 per year for the average employee, according to the Treasury.
  • An increase in the Employment Allowance, the relief small businesses get on their National Insurance bill. The allowance will rise by £1,000 to £5,000 from April 2022. The tax cut is worth up to £1,000 per employee.
  • A reform to business tax reliefs, allowing businesses to claim relief on maths-based R&D expenditure.
  • A promise to make further reforms to the tax rules to incentivise businesses to invest.
  • A promise to revisit the operation of the Apprenticeship Levy to see if it can be improved to better incentivise expenditure on employee training.
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Shorter Reads

Spring Budget Statement 2022

The Chancellor has pledged to cut the basic rate of income tax by the next general election in 2024. This announcement was not anticipated beforehand. Tax & estate planning Partner, James Austen, comments on this and the so-called “Tax plan” outlined:

Published 23 March 2022

Associated sectors / services

  • Tax & Estate Planning

Authors

“To my mind, the potentially more important announcement was that of the so-called “Tax Plan*”: tax professionals have been asking the Treasury for this for years. Unfortunately, rather in common with the precipitate “income tax cut” announcement, the Tax Plan actually published today is really nothing of the sort: apart from the sections on today’s announcements, it is mostly a loose wish-list of broadly-described aspirations, with none of the intellectual or fiscal clarity one would hope to see. That is a real missed opportunity.

It is possible that the Chancellor made this announcement before the document itself was ready for publication. In which case, the Treasury will hopefully be working on a new version of the Tax Plan between now and the Autumn Budget Statement, and that the document published then will better reflect what the Chancellor announced today. In particular, the Tax Plan should include clear and precise statements about Government plans for the future trajectory of tax policy, with appropriate periods for consultation before changes are implemented.

Most importantly, there should be no more unwelcome and disruptive changes to tax legislation without prior notice.”

*The Tax Plan policies outlined by the Chancellor include:

  • A 5p per litre cut in fuel duty for at least the next year. Fuel duty will go down from 57.95p per litre to 52.95p, resulting in an annual saving of £200 for the average van driver, according to Treasury estimates.
  • A time-limited VAT cut on the cost of home insulation, solar panels and heat pumps to encourage the installation of energy-efficient home improvements. VAT will drop to zero from April 2022, having previously been as much as 20% in some instances.
  • A £3,000 rise in the National Insurance threshold to £12,570 from July 2022. This will result in a tax cut of £330 per year for the average employee, according to the Treasury.
  • An increase in the Employment Allowance, the relief small businesses get on their National Insurance bill. The allowance will rise by £1,000 to £5,000 from April 2022. The tax cut is worth up to £1,000 per employee.
  • A reform to business tax reliefs, allowing businesses to claim relief on maths-based R&D expenditure.
  • A promise to make further reforms to the tax rules to incentivise businesses to invest.
  • A promise to revisit the operation of the Apprenticeship Levy to see if it can be improved to better incentivise expenditure on employee training.

Associated sectors / services

  • Tax & Estate Planning

Authors

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