With worries of inflation affecting businesses and individuals alike, rising costs and increasing bills, Chancellor Rishi Sunak announced a range of measures to help carry the burden during the Spring Statement.
From capital allowances to the National Insurance contributions (NICs) threshold, there was a lot of information to digest. We’ve written this blog to help you understand what effects this may have on your day-to-day.
R&D and Capital Allowances
A main goal for the Government was to set out the future of business development across the country. Following a paper published in 2021, it has been confirmed that the Government will be reforming R&D tax relief.
As of April 2023 companies and businesses will be able to claim relief on cloud computing costs associated with R&D, this will include cloud storage. The Government has pledged to increase its spending in R&D by £5bn, meaning total spend by April 2024 will be £20bn.
The tax relief will be expanded with the costs being calculated through pure maths. It will also focus on R&D carried out in the UK with overseas spending still claimable if it meets the right criteria.
With the current super deduction due to end in April next year, there will be potential for further tax reforms to encourage business investment.
Any decisions will be announced in the Autumn Budget later in the year. The Government is currently considering the permanent increase of the annual investment allowance. There are also ideas of increasing writing down allowances for main and special rate assets from 18% to 20% and from 6% to 8%.
Tax and National Insurance
Now let’s focus on changes that have already been confirmed.
The NICs threshold has been raised by about £3,000, meaning that you will start paying NICs from the point of earning £12,570. This will be starting from July and will align NICs with the income tax threshold.
During the Spring Statement, Sunak referred to this as a £6bn personal tax cut for 30 million workers across the country and would amount to £330 a year for employees.
Self-employed workers will also have their NICs threshold changed so that it will be in line with employed workers.
Income tax will be slashed in 2024 from 20% to 19%, said to be the first cut to the basic rate for 16 years.
This new rate will mean the average taxpayer will be £175 a year better off and represents a £5bn tax cut overall.
As well as income tax, as of 23 March there has been a cut to fuel duty where both petrol and diesel prices have been dropped by 5p per litre. For a typical 55-litre family car this will save £3.30 according to the RAC. This cut, plus the freeze on fuel duty until 2023, could save drivers £5bn over the next year.
Get in touch
As we mentioned earlier, this is a lot to take in but we’re on hand to answer any questions you may still have about how the statement affects you.
Get in touch to talk about tax changes.