Chancellor unveils a new ‘Tax Plan’

As part of his Spring Statement 2022, Chancellor Rishi Sunak revealed a three-part Tax Plan to cover the remainder of the Parliament. The three elements of the plan are:

1. Cost of Living

The Spring Statement formed the first part of the plan – setting out further steps to ‘help working families and support businesses’ – including:

  • Fuel duty for petrol and diesel would be cut by 5p per litre from 6pm on 23 March with the reduction lasting until March 2023
  • Although the Chancellor confirmed implementation of the politically contentious 1.25 percentage-point rise in most National Insurance contributions (NICs) for the Health and Social Care Levy, he revealed that this would be mitigated by an increase to the National Insurance Primary Threshold and the Lower Profits Limit from £9,880 to £12,570 from July 2022, to align with the Income Tax personal allowance. This will benefit almost 30 million working people by an average of £330 a year
  • From April 2022, self-employed individuals with profits between the Small Profits Threshold and Lower Profits Limit will continue to build up National Insurance credits but will not pay any Class 2 NICs
  • Small businesses can benefit from an increase to the Employment Allowance to £5,000 from April 2022, which will mean that half a million businesses will get a tax cut worth up to £1,000 each.

2. Capital, People, Ideas

The second part of the plan focuses on creating the right conditions for private sector led prosperity through growth and productivity. The government is investing £600bn over the next five years and is keen to get businesses to invest more as well. The government intends to engage with businesses over the remainder of 2022 to find the most effective way to cut and reform taxes on business investment – conclusions will be announced in the Autumn Budget

3. Sharing Growth

In a tax break worth over £5bn a year, the final part of the Tax Plan, entitled ‘Sharing Growth’, confirms a cut in the basic rate of Income Tax from 20% to 19% in England, Wales and Northern Ireland in 2024. The Scottish government will receive their share of this funding which can be used to cut taxes or increase spending.

Tax reform

As part of the Tax Plan, the Chancellor has reaffirmed plans for tax reform to make the tax system ‘simpler, fairer and more efficient.’ This will be done by continuing the review of over 1,000 tax reliefs and allowances in the tax system by 2024.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change. The Financial Conduct Authority does not regulate tax planning.