Period of tax certainty needed

Many were not expecting a great deal of excitement in the Spring Statement. In terms of extra cash for the Government, VAT receipts are £61bn higher this year than last, no doubt boosted by higher fuel prices, we have the National Insurance rise of 1.25 per cent from this month and corporation tax increases next year.

Conversely, £83 billion of Government interest costs will be a large draw on funds as will the cost of council tax and fuel rebates.

We knew Rishi Sunak would like to further incentivise businesses to invest in capital, training and Research & Development (R&D). But his statement was much broader than expected and he announced a Tax Plan which will set out the principles for helping people with the cost of living, for higher growth and to distribute wealth more fairly.

Fuel duty is cut by five pence per litre for the next 12 months. But perhaps the most surprising change is a large increase in the threshold at which we pay National Insurance to align it with the personal income tax allowance and the wish to reduce the basic rate of income tax from 20 to 19 per cent.

Future planned discussions on reliefs such as training, qualifications and R&D tax credits are welcome.But for SMEs, these measures, and the temporary cut in fuel duty, are unlikely to fully mitigate the inflationary impact of the Health and Social Care levy from April 2022.

The alignment of the National Insurance and personal allowance thresholds affects the employed and self-employed.

The Chancellor’s announcement means that from July 6 this year, the primary threshold for employees and the lower profits limit for the self-employed will increase from £9,880 to £12,570 aligning the NI threshold with the personal allowance.

As a result, an employee or self-employed person earning £10,000 will now receive this income free of tax and NI. We now need a period of tax certainty as the UK continues its path towards recovery.