What you need to know about the Government’s spending and taxation plans.
The Spring Statement, delivered in Parliament by Chancellor Rishi Sunak on 23 March 2022, isn’t meant to have any policy announcements. But the cost of living crisis is getting worse, with the energy hikes coming next month the largest cause for concern.
So as a result, we were given a handful of measures to relieve some of the pressure. Here’s what was announced and what difference this could make to your finances.
More detail may come in the next few days, and I’ll add information below as it’s revealed.
I’ll also be talking to the financial journalist Faith Archer on Thursday evening’s bonus episode of my Cash Chats podcast to analyse everything. You can subscribe now on your favourite podcast app so you don’t miss it.
Watch my video on YouTube talking about the Spring Statement or keep reading.
Fuel and energy
There’s a 5p per litre cut to tax on petrol, which actually works out as 6p as there’s VAT on top. Depending on the size of your car, this will reduce the cost to fill a tank cost by around £2.50 or £3.50. So not much.
It comes into action from 6pm on 23 March 2022 and will last for a year. It will be worth a total of £2.4billion.
Of course, prices are still increasing all the time, so you’ll still be paying much more than you were a few months back.
Nadda. Zilch. Nothing. There’s no additional support to add to the £150 rebate due in April via Council Tax and £200 “loan” in October. A windfall tax on energy firms, as wanted by Labour, did not appear.
There will also be a cut in VAT from 5% to zero for “energy saving materials”, things like solar panels and heating pumps. It’s a welcome move, but only the well off will be able to afford these changes.
Benefits and support
Household Support Fund
Those who are most vulnerable can apply for help from their local council’s Household Support Fund for help with things like bills, and the size of this will double from £500 million to £1 billion.
This sounds like a lot of money, but it’s a fraction of what would be needed to make up for the additional costs, so it really will only help those facing some kind of crisis with their finances.
No change. This will only increase by 3.1%, as dictated by last September’s inflation figure, well below the average 7% predicted for the next year.
It’s the same here, with the annual increase remaining 3.1%. There was also no talk of bringing back the “triple lock”.
Wages and Tax
The increase to National Insurance Contributions (NIC), announced last September, is still going ahead in April. But from July the threshold where you start paying this is jumping up by a huge £3,000 to match the wages where you start paying Income Tax (£12,570 a year).
This means for the next financial year, those earning £35,000 or less will either pay the same or less National Insurance, with the most made here will be around £330 for those earning £12,570. The Treasury says this amounts to 70% of those paying NIC.
If you earn more than £35,000 in the next year then the increased NIC paid on those additional earnings will be more than the money saved, and you’ll take home less pay each month. Those earning £60,000 a year will see a loss of £232 this year.
It’s worth coming back to the dates for those changes. The NIC increase starts 6 April, but the threshold change isn’t until July. So you will be taking home less in your pay packet in April, May and June. Then from July, depending on your salary, you might be paying less.
Technically, when you average out the different allowances at the start and then the rest of the year, the threshold will be £11,908 for 2022/23. Then from 2023/24, when the whole year is at £12,570 (unless it changes again), those earning between £35,000 and £40,000 will benefit from a slight cut in their NICs.
Income Tax cut in 2024
One that won’t happen for two years is a cut to Income Tax. The basic rate tax rate will be 19% rather than 20% from 2024. But this is a long way away so it won’t help anyone right now, and a lot can change in 24 months.
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