Spring Statement 2022 and tax rises
There has been a lot in the press made of the squeeze on household spending and the Chancellor was under much pressure to help with this when he approached the dispatch box on 23rd March to make the Spring Statement. His increase of the primary threshold for National Insurance is meant to be his key answer to that issue, but it is worth noting that from a business perspective this increasing threshold is not being mirrored to the secondary threshold for National Insurance and hence the 1.25% increase to Employers’ National Insurance is going ahead in full. When this is combined with the 1.25% increase in dividend tax from April 2022, and the 6% increase in corporation tax from 2023, a business owner’s take-home pay may be over 10% lower than 2021/22 as a result of tax alone, and of course that is without the effects of inflationary rises that may not be fully passed on in the selling price.
Those with large staffing costs will be hit hardest, as the 1.25% extra National Insurance applies across the payroll bill. Businesses were promised some continuing attractive tax reliefs on investment in plant and machinery going forwards, but details were light with the Chancellor going away to investigate how best to manage this. I was also somewhat concerned by the comment about making the tax system ‘simpler, fairer, and more efficient’. This to me was at least a hint that the government could move ahead with the long awaited reforms to capital gains tax and inheritance tax, as arguably the bits of the tax legislation that could be perceived to be ‘complex and unfair’ would be the reliefs to these taxes which business owners benefit from. Although the Spring Statement was never meant to be a budget, there was little in there to help concerned business owners get through the next 12 months, with business taxation being simply another inflationary pressure to add to the long list of other inflationary pressures currently out there.