Spring Statement: any cheer for landlords or the self employed?

Against a backdrop of record inflation that reached 6.2% in the 12 months to February 2022, a 30-year high driven by rising fuel and energy costs, Chancellor Rishi Sunak has delivered his Spring Statement. But amid the concern over rising prices and costs, was there any good news for sole traders, the self-employed, landlords and others who pay tax through Self Assessment?

National Insurance threshold to increase

In his Spring Statement the Chancellor announced a £3,000 increase in the National Insurance threshold, which was higher than some expected. Sunak said: “From this July, people will be able to earn £12,570 a year without paying a single penny of Income Tax or National Insurance.”

He equated this to “a £6bn personal tax cut for 30m people across the UK. A tax cut for employees worth [more than] £330 a year”. Sunak described it as “the largest increase in a basic rate threshold ever and the largest single personal tax cut in a decade.”

The Chancellor also announced his intention to make the first reduction in the basic rate of Income Tax in 16 years, which he said would fall from 20% to 19% before the end of this Parliament in 2024.

1.25 percentage point NIC increase stays

Despite appeals to change his mind to help cushion the “cost of living crisis”, Sunak did not decide to delay or ditch the imminent increase in National Insurance contributions (NICs), which he said was necessary, with the additional funding needed now, he stressed.

So, as announced last year, from 6 April 2022, for one tax year, NICs will increase by 1.25 percentage points. Additional revenue from the NIC increase raised in 2022/23 will be spent on the NHS, health and social care across the UK, according to the government. A new permanent levy for the same purpose will be introduced in 2023/24.

This April 2022 NIC increase will impact employer Class 1 NICs, employee Class 1, Class 1A and Class 1B NICs, as well as Class 4 NICs, which will all increase by 1.25 percentage points.

Employment Allowance

The chancellor also announced that he plans to increase the Employment Allowance up to £5,000 from £4,000, describing it as a tax cut worth up to £1,000 for half a million small businesses. The measure will be introduced in two weeks’ time. Employment Allowance enables eligible employers to reduce their annual National Insurance costs by claiming against their NICs.

Fuel duty cut

Good news for sole traders and landlords who rack up plenty of business miles each year, with the Chancellor announcing a 5p cut in fuel duty, which he described as “the biggest cut to all fuel duty rates ever”. The much-welcomed reduction will come into force at 6pm on 23 March and last until March 2023.

Economic outlook

Sunak said the Office for Budget Responsibility (OBR) believes the UK economy will grow by 3.8% in 2022, with far lower growth of 1.8% expected in 2023, and 2.1%, 1.8% and 1.7% growth anticipated in the subsequent three years.

The OBR is a non-departmental public body the government established to provide independent economic forecasts and independent analysis of UK public finances. It was too early to assess the impact of the war in Ukraine, Sunak added. And just as ominously, the OBR now predicts that UK inflation will hit 7.4% by the end of the year, which is less welcome news for sole traders, landlords and others who are already worried about rising costs.

• GoSimpleTax offers you an easier way to complete and file your Self Assessment tax return. And to ensure that your tax return is error-free and that you’re paying no more tax than necessary, why not get your Self Assessment tax return checked by one of our experts?

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.