Always Budget for the future…

How exactly will the Spring Statement affect you? The main focus of Rishi Sunak’s Spring Statement was on measures to help those hit hardest by the rising cost of living.

The annual inflation rate in the UK increased to 6.2% in February – up from 5.5% in January and above market forecasts of 5.9%.

It is the highest rate of inflation since March 1992, as the rising costs of energy and food continue to squeeze living standards.

While the Chancellor continued with his earlier pledge to raise the rate of National Insurance and dividend tax by 1.25 percentage points to help with social care reforms, he countered some of its impact by raising the threshold at which National Insurance becomes payable.

And in a shock move, he announced there will be 1% cut to the basic rate of income tax from April 2024.

Below are some of the key points that were announced.

Income tax in England, Wales and Northern Ireland

The basic rate of income tax will fall from 20% to 19% from April 2024.

It was also confirmed that the dividend tax rate will increase by 1.25 percentage points from April 2022 as part of a measure to fund social care reforms.

The tax bands remained unchanged, so you can still earn £12,570 pa tax free and another £37,700 at the basic rate band. These bands will be frozen until 2025/26.

In Scotland, aside from any changes from 2024, the Scottish Budget confirmed that the Scottish Starter and Basic Rate bands have been increased by inflation while all other bands are to remain frozen.

National Insurance

A very welcome surprise move was the increase to the threshold at which individuals start to pay National Insurance. This will be brought in line with the annual personal allowance of £12,570 and will happen from July.

From April the self-employed will not have to pay class 2 flat rate National Insurance contributions if their profits are below £9,880, with the lower profits limit rising to £12,570.

This will mean an extra 1.25% added to the rates of National Insurance for 2022/23 for employees, employers and the self-employed. The rise will become a standalone levy from 2023.

Pensions

There were no changes to pension or ISA allowances in the announcement, but remember the loss of the state pension “triple lock” guarantee.

It is so-called because in recent years, state pensions have been uprated each year by the higher of three figures: the Consumer Prices Index, 2.5% or the average increase in earnings. However, for tax year 2022/23, the earnings element has been suspended so in 2022/23, state pensions will increase by 3.1% (the September 2021 CPI figure).

To learn more about how the Spring Statement has affected you visit warrenshute.com