August 11, 2022

United Kingdom - Spring Statement Summary

United Kingdom - Spring Statement Summary

The Spring Statement of the British Government is also known as the “mini-budget” and is one of the two main statements HM Treasury makes each year to Parliament upon publication of economic forecasts. The other statement is known as the Autumn Budget.

The Spring Statement is generally a light economic update with major policy announcements taking place in autumn. However, the cost-of-living crisis and events in Ukraine have prompted the UK Chancellor, Rishi Sunak, to act promptly.

The Chancellor introduced several measures in the Spring Statement with a view to mitigate rising cost-of-living:

  • Temporarily reducing fuel duty by 5p for a period of 12 months, from the 23rd of March 2022.
  • Removing VAT on energy saving home additions (solar panels, heat pumps, etc.) and removing some limitations on claims.
  • Re-affirming that the program of £350 household loans to help with higher energy costs will go ahead for those eligible, in council bands A-D.
  • Aligning the threshold at which individuals will start to pay National Insurance (NI) with the annual personal allowance of £12,570. This will take effect from July 2022, and applies to both employees and self employed workers.

The Chancellor also announced a three-part tax plan to take the government through to the end of the current parliament. The first part included the covers measured above, with the second and third parts more focused on encouraging growth and productivity. R&D reform was already on the agenda, and the Chancellor emphasised their focus on making R&D relief more effective.

Looking to future tax years, the Chancellor outlined a decrease to the basic rate of income tax from 20% to 19%, which will occur in April 2024, provided that certain fiscal targets are achieved. Additionally, HMRC and DWP received additional resources for tax collection, fraud and error prevention, and debt collection.

Takeaway:

Our analysis of the Spring Statement revealed that there were few significant tax announcements relating to our private wealth clients. There were no notable announcements in relation to U.K. capital gains tax, inheritance tax, or stamp duty land tax. It is anticipated that more meaningful changes may be announced in the Autumn Budget as the government’s tax plan document has indicated that they are seeking to streamline the tax system – potentially reviewing the over 1000 existing tax reliefs and allowances.

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