Market View

The Spring Statement

On 23 March 2022, the Chancellor gave his Spring Statement to Parliament. Simon Allister discusses the newly announced measures.

Rishi Sunak Chancellor Spring Budget 2022
Simon Allister, Partner and Head of Wealth Planning

Rishi Sunak has not had it easy since he became Chancellor of the Exchequer back in early 2020. His first budget was a true baptism of fire at the very start of the COVID-19 outbreak. He has grappled with many unforeseen challenges since. Yesterday’s Spring Statement came amidst rising inflation and soaring energy prices with many predicting the UK will see the biggest fall in living standards since records began, more than anything seen in the post-war period.

The Office for National Statistics has predicted a reduction in real household disposable incomes (RHDI) on a person by person basis by 2.2 percent in 2022-23. Considered against a backdrop of the war in Ukraine and a national debt now greater than the size of the UK economy, it is no surprise that the Chancellor has received mounting pressure to combat the cost of living and try and ease the strain.

The Chancellor did include several measures in the Spring Statement which aim to do this. Notably:

  • A temporary 12-month cut of 5p per litre on fuel duty from 23rd March 2022, which will come as a welcome relief for many.
  • No VAT on energy-saving home additions (solar panels, heat pumps, etc.) and, now that we are no longer part of the EU, removing the red tape on claiming such reliefs which had previously been imposed by the European Courts in 2019.
  • Loans to certain households for help with energy costs had already been announced last month, amounting to £350 per household (for those eligible, in council bands A-D).
  • The thresholds at which individuals will start to pay National Insurance (NI) will be brought in line with the annual personal allowance of £12,570. This will take effect from July 2022 and applies to both employees and the self-employed.

The Chancellor seemed particularly pleased when delivering the final point, although, at the same time, he resisted the temptation to amend the controversial 1.25% increase in NI contributions planned for this April.

Other themes of the Statement revolved around boosting productivity and growth by creating the conditions for the private sector to invest more, train more and innovate more. To do this, the UK Government intends to cut and reform business taxes and create a "new culture of enterprise2 and the conditions for private sector-led growth.

As the Chancellor indicated previously, there were few significant tax announcements of note relating to private clients. There were no announcements in relation to capital gains tax, inheritance tax or stamp duty land tax. The headline measure is a plan to reduce the basic rate of income tax from 20% to 19% from April 2024. Whether the Chancellor will ultimately be able to honour such a commitment, with so many variables at play, over the years ahead remains to be seen.

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