The Chancellor made his annual Spring Statement speech this week where he set out the Government’s tax plan.
Key measures the Chancellor announced as part of the plan include:
• an increase to the National Insurance Primary Threshold for Class 1 NICs and the Lower Profits Limit for Class 4 NICs from 6 July 2022, aligning it with the equivalent income tax personal allowance which is set at £12,570 per annum
• from April 2022, self-employed individuals with profits between the Small Profits Threshold (SPT) and the Lower Profit Limit will not pay Class 2 NICs, while allowing individuals to be able to continue to build National Insurance credits
• the Employment Allowance will be increased by £1,000 from 6 April 2022 to £5,000, which will benefit around 495,000 businesses
• an immediate reduction in duty on diesel and petrol from 6pm on 23 March 2022, by 5 pence per litre, for 12 months.
The full detail on all the measures, some of which are subject to parliamentary approval, can be found on GOV.UK.
Consumer champion, Martin Lewis, said the increase in the national insurance threshold would be a tax cut for those earning under £35,000 a year.
Citing the Institute for Fiscal Studies, Lewis said the “break even” annual salary would be £35,000, meaning anyone earning less than that had been handed a tax cut.
“From July, if you earn £35,000 or less, you will pay less national insurance than you do currently on the same income.
“For those at the lower end of the scale it could be a good few hundred pounds.
“If you earn £35,000 or more, than you will pay more national insurance than you do currently.”
Pat Harrington, General Secretary of Solidarity had this to say on the Spring Statement:
“Of course, our union welcomes some of the measures announced.
Are the measures announced enough to protect the incomes of working people? No, is the simple answer.
It’s worth noting though although Sunak raised the point at which workers will start paying national insurance to £12,570 a year that won’t come into effect until July, while rates go up 1.25 percentage points in April.
Hours before Sunak made his statement, official figures showed the RPI rate of inflation — the most accurate one — had risen to 8.2 percent. If your pay or benefits are going up less than that, then you are facing a cut. Then there is also the looming threat of massively increased energy costs.
That means that even workers who’ve managed so far and could afford expenses will take a hit. Your car breaks down, your boiler needs a repair, your landlord kicks up the rent or your mortgage goes up — suddenly it’s hard to find the money. And we know that few people have anything much in a ‘rainy day’ fund.
Those who point to a new £500 million fund for councils to help the poorest cope should remember that the inflation-driven, real-terms cut in benefits equates to £12 billion.
How have we got to this point? The vast debt run up by the UK Government during the pandemic is a big part of it. In 2022-23 alone, the UK is forecast to spend a staggering £83 billion just on paying off the interest – the highest figure on record. Your union believes that the reaction to the Pandemic was disastrous, and that the government panicked and had no real plan. The unions should have been involved in planning from the start.
We must look at how to deal with this crisis on many different levels including the personal and union ones.”
Picture of Sunak. Chris McAndrew, CC BY 3.0 https://creativecommons.org/licenses/by/3.0, via Wikimedia Commons