23 March 2022
In his Spring Statement the Chancellor’s main focus was on measures to help those hardest hit by the rising cost of living.
While he continued with his earlier pledge to raise the rate of National Insurance and dividends by 1.25% percentage points to help with social care reforms, he countered some of its impact by raising the threshold at which NI becomes payable. And in a surprise move he announced that there will be 1% cut to the basic rate of income tax from April 2024.
Pensions and savings
Pension tax relief - There were no changes to pension tax relief in the Chancellor’s Budget.
ISAs - The 2022/23 annual subscription limits for adult and junior ISAs will remain at £20,000 and £9,000 respectively.
Previously announced:
Lifetime allowance (LTA) - frozen at £1,073,100. There will be no inflationary increases to the LTA; it will remain at its current level until April 2026.
State Pension ‘triple lock’ - In recent years, State Pensions have been uprated each year by the higher of CPI, 2.5% and the average increase in earnings (known as the ‘triple lock’). However, for tax year 2022/23, the earnings element has been suspended. This means that, in 2022/23, State Pensions will increase by 3.1% (the September 2021 CPI figure).
Income tax
Earnings and savings - In England, Wales and Northern Ireland, the basic rate of income tax will fall from 20% to 19% from April 2024. This will apply to both non-savings and savings income. The trust rate will also reduce to 19% for the first £1,000 of income (the standard rate band). The Scottish Government will decide on the rates in Scotland from 2024, but will be supported by additional funding.
Dividends - It was confirmed that the rate of tax for dividends will increase by 1.25 percentage points as part of the measures to fund social care reforms. This will mean the new dividends rates for individuals will be 8.75% (basic), 33.75% (higher) and 39.35% (additional). The rate for trustees will be 39.35% on amounts in excess of the trust’s standard rate band. Whilst there is to be an increase in NI thresholds to offset some of the impact of the rate increase to employees, there was no corresponding increase to the dividend allowance to help business owners
Allowances and thresholds - The personal allowance and basic rate band will be frozen at £12,570 and £37,700 respectively until 2025/26. This means that the higher rate tax threshold will remain at £50,270 for those entitled to a full personal allowance.
National Insurance
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 happen from July 2022, and applies to both employees and the self-employed.
From April the self-employed will not have to pay class 2 flat rate NI contributions if their
profits are below £9,880, with the lower profits limit rising to £12,570 from July.
The increase to NI to help pay for social care reforms will go ahead as planned. This will see an extra 1.25% added to the rates of NI for 2022/23 for employees, employers and the self-employed. It's intended that the 1.25% rise will become a separate standalone levy from 2023/24.
Capital Gains Tax
No further changes announced.
Previously announced: The annual exempt amount will remain frozen at £12,300 for individuals (and personal representatives) and to £6,150 for trustees of settlements, until 2025/26.
Inheritance tax
No further changes announced.
Previously announced: Both the nil rate band and residence nil rate band will remain fixed at £325,000 and £175,000 respectively until April 2026.
Corporation tax
No further changes announced.
Previously announced: Corporation tax is set to rise to 25% from April 2023. However, small companies with profits below £50,000 will continue to pay at the current rate of 19%. There will also be a reintroduction of tapering relief for businesses with profits under £250,000 so that they pay less than the main rate.
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