UK Budget (Spring Statement) 2022 – Highlights
The Chancellor of the Exchequer presented the United Kingdom (UK) Budget (Spring Statement)2022 before Parliament on March 23, 2022. UK National Statistics has confirmed that inflation has reached a 30-year high. As per Spring Statement, Inflation rate is expected to peak at 8.7% in Q4 of 2022 with forecast annual inflation rate for 2022 being 7.4%. The GDP is expected to grow by 3.8% in 2022, with forecast GDP growth rate of 1.8% for 2023. The Government has proposed certain measures to provide support to households and businesses in view of rising cost of living.
The following are the key proposals:
- For Individuals and employers:
- National Insurance – The annual Primary Threshold will be increased to GBP 12,570 from GBP 9,880 effective from July 2022. Further, for self-employed, the Lower Profits Limit has also been increased to GBP 12,570.
- Personal Income Tax (PIT) – The Basic rate of Personal Income Tax would be lowered to 19% from 20% effective from April 2024.
- National Living Wages (NLW) – National Living Wages (NLW) for individuals above the age of 23 years will increase by 6.6% to GBP 9.50 per hour effective from April 2022.
- Employment Allowance – The Employment Allowance has been increased from GBP 4,000 to GBP 5,000 effective from April 2022 to assist the employer to reduce their NIC liability. The allowance is deductible from employer’s national insurance contribution outgo.
- Indirect taxes:
- Relief for Energy Saving Materials (ESM) – Effective from April 2022, the installation of ESMs such as solar panels and heat pumps shall be taxed at zero rate for VAT. Further, wind and water turbine would also be considered as ESMs.
- Reduced Fuel Duty – The fuel duty on Petrol and Diesel is reduced by 5p per litre for the period of 12 months until March 2023. The cut is effective from March 23, 2022, 6 pm.
- Other tax benefits
- Annual Investment Allowance – Annual Investment Allowance (AIA) allows company to deduct full value (100%) of an amount invested in Qualified Plant and Machinery (excluding Car) for the year. Previously this allowance was set at GBP 200,000. However, the said limit is increased to GBP 1 million until March 2023. The Government is also looking at ways for providing further tax relief for capital investment which are likely to be announced in Autumn budget. Earlier the Government has introduced super deduction which is a capital allowance in the first year of investment and is available up to March 2023.
- R&D Relief – The Government is proposing to revamp the R&D relief. It intends to include cloud cost associated with R&D in the scope of relief. More announcements are expected in the future Finance Bill.