In Rishi Sunak’s fourth Budget delivered today, the Chancellor reported forecasted economic growth of 3.8% in 2022, lower than previously predicted, with inflation likely to reach 7.4% later this year. Inflation is forecast to come back under control and economic growth rise again from 2024. Growth in 2021 was reported to have been stronger than the 6.5% forecast, with GDP rising 7.5%.
The Chancellor focused on the rising cost of living for families, amidst the lingering effects of the coronavirus pandemic and impact of the war in Ukraine on the recovery of the UK economy.
He announced a tax plan designed to ‘help families, create the conditions for higher growth and share the proceeds of growth fairly.’
Here is our easy-to-digest summary of the announcements affecting business owners.
Employment Allowance to increase
The Employment Allowance, which allows smaller businesses to reduce their employers’ National Insurance contributions annually, will increase by £1,000 to £5,000 from next month.
The Chancellor stated that this will be ‘worth up to £1,000 for about half a million small businesses’.
Your Business Tax
Research and Development Tax Relief to be reviewed again
In addition to the measures to modernise the Research and Development (R&D) Tax Relief system announced in the Autumn 2021 Budget, the Chancellor pledged to review this credit again in the autumn, to decide whether it can be made more generous. He also stated he will cut tax rates on business investment at this time.
Reduction in business rates for hospitality sector confirmed
It was highlighted that the business rates discount announced in the Autumn 2021 Budget, to come into effect next month for retail, hospitality and leisure businesses will save them up to £110,000. A typical pub will save £5,000, the Chancellor claims.
Your Personal Tax
There were no measures announced in direct connection with rising energy price rises, beyond the council tax rebates to help manage the cost of living, previously announced. Instead, the focus was on changes to the fuel duty, national insurance, energy-efficient home developments and the basic rate of income tax.
Immediate cut on fuel duty
Fuel duty is being cut by 5p a litre from 6pm today, until March 2023.
Household Support Fund to double
The new Household Support Fund, announced by the Government as part of the 2021 Autumn Statement will receive an extra £500m in funding next month. This will be provided to local authorities to help poorer families.
0% VAT on home energy-saving materials
Homeowners will pay 0% VAT on energy-saving materials, for the next five years. This include insulation, solar panels, wind and water turbines.
This does not apply to the public in Northern Ireland but the Chancellor has promised equivalent funding.
Double the fund going to local authorities to support families.
National Insurance Threshold to increase by £3,000
It was confirmed that the new Health and Social Care Tax, beginning with a 1.25 percentage point increase in National Insurance paid by both employers and working adults, will go ahead from next month.
Alongside this, the Chancellor announced that the National Insurance threshold will increase by £3,000 to £12,570 from July 2022, in a move he claimed will see 70% of workers having their national insurance payments cut by more than they pay for the new levy.
Basic Rate Income Tax to Drop in 2024
The Government will cut the basic rate of income tax from 20 to 19p in the pound in 2024. This is the first cut of this kind in 16 years and is said to be worth an average of £175 each for 30 million people.
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