This week, the Chancellor of the Exchequer, Rishi Sunak, delivered the UK’s Spring Budget.
In his Budget announcement, Mr Sunak set out the government’s plans to cut fuel duty by 5p a litre, raise the threshold at which workers start paying national insurance and announced a further 1p reduction in income tax in response to the rising cost in living.
With the inflation rate rising to 6.2% two years to the day after the announcement of the first Covid-19 lockdown, the chancellor admitted the Russian invasion of Ukraine would lead to slower than expected growth and higher inflation this year than previously forecast.
Here is what was announced in the UK Spring Budget 2022:
The Spring Budget 2022 at a glance
State of the economy and public finances
- The UK economy is forecast to grow by 3.8% this year, according to the Office for Budget Responsibility, a sharp cut from its previous prediction of 6.0%
- The economy is then forecast to grow by 1.8% in 2023, 2.1% in 2024, 1.8% in 2025 and 1.7% in 2026
- The annual inflation rate was 6.2% in February, and is likely to average 7.4% for the rest of this year, but with peak of 8.7% in the final quarter of 2022
- The unemployment rate is now predicted to be lower over the next few years than in the OBR’s previous forecast in October
- Debt as a percentage of GDP is expected to fall from 83.5% of GDP in 2022/23 to 79.8% in 2026/27
- The government is forecast to spend £83bn on debt interest in the next financial year, the highest on record
Public sector net debt
Fuel, energy and living costs
Following Putin’s unprovoked and premeditated invasion of Ukraine, cost of living pressures have intensified and uncertainty has increased.
The government laid out their plans to help support households in the coming 12 months.
- Fuel duty will be cut by 5p per litre until March 2023
- Homeowners installing energy efficiency materials such as solar panels, heat pumps, or insulation will see VAT cut on these items from 5% to zero for five years
- Local authorities will get another £500m for the Household Support Fund from April, creating a £1bn fund to help vulnerable households with rising living costs
- However, the OBR on Wednesday forecast that energy bills will rise by 40% again in October, if wholesale gas prices remain at the same level they are now
Contributions to CPI inflation
Taxation
The Spring Statement sets out the government’s plans to reform and reduce taxes. The Tax Plan – with its focus on helping families with the cost of living, creating the conditions for private sector led growth, and sharing the proceeds of growth fairly with working people – will drive improvements in living standards and support levelling up across the UK.
- The income threshold for at which point people start paying National Insurance will rise from £9,880 to £12,570 in July, which Mr Sunak said was tax cut for employees worth over £330 a year
- Mr Sunak pledged to cut basic rate of income tax from 20p to 19p in the pound. This is a tax cut of over £5 billion a year and represents the first cut in the basic rate of income tax in 16 years.
- The Employment Allowance, which gives relief to smaller businesses’ National Insurance payments, will increase from £4,000 to £5,000 from April.
How does the Budget affect you?
TBL Accountants are your local accountancy firm operating in Southend and across Essex. We specialise in a variety of services as personal, business, and charity accountants. Want to find out more? Get in touch with our team today.
Here for you.
