All eyes will be on the Chancellor on March 23, when he stands up in the Commons to deliver his Spring Statement against a backdrop of inflation, rising fuel prices, the war in Ukraine, and the aftermath of the pandemic.
Will there be tax rises, as the Government tries to claw back some of the multi-billion-pound spent on Covid business support? Will further measures be brought in to help households cope with the rising cost of living? The Chancellor has already announced a direct support package for households facing swingeing increases in their fuel bills.
One thing we are fairly sure of: a rise in National Insurance Contributions (NICs) will go ahead as planned. Despite pressure from within his own party to shelve this increase – called the Health and Social Care Levy, and introduced to help the NHS catch up after Covid – Rishi Sunak seems to have weathered this storm.
But is there a chance the Chancellor will revise the level of the increase? As it stands, from April 6, certain classes of NICs paid by both employed and self-employed workers are due to rise by 1.25%. There is also a planned increase in taxes on share dividends from April 6, also going up to 1.25%.
Will the Chancellor make any changes to the tax thresholds? Fiscal drag is caused by tax allowances and thresholds remaining frozen, whilst incomes increase. This results in more income being brought into higher rates of tax, which is good news for the treasury but not the taxpayers. This ‘stealth tax’ has been hotly debated.
While we’re on the subject of taxes, there are a few other changes planned for April. There is a new 4% Residential Developer Tax from April 1; the current 12.5% rate of VAT on hospitality and tourism is meant to revert to 20% from April 1; and all VAT registered businesses must join the Making Tax Digital system for VAT (although with so many yet to sign up, it is possible the Chancellor will announce a deferment).
The Covid discount on business rates drops from 66% to 50% on April 1, and there is also a new Plastic Packaging Tax from the same date, which could affect the price of food.
Finally, there has been speculation over the last few months that the Chancellor will increase Capital Gains Tax, so this is another one to look out for in the Spring Statement.
We will be watching the speech and bringing you our analysis and what it means for your business and your household income.