One big surprise in the UK’s March 2022 Spring Statement was the promise to cut the basic rate of income tax by one percentage point from April 2024. The Chancellor also announced that the national insurance contributions threshold would be aligned with the income tax threshold for employees and the self-employed (it sounds as if the threshold for employer contributions will not be changed). This alignment will be implemented from July 2022 (rather than the start of the 2022/23 tax year in April). The reason given is that “July is the earliest date that will allow all payroll software developers and employers to update their systems and implement changes.”
What does this mean in the context of other tax changes? The Office Budget Responsibility’s update on the UK’s economic and fiscal outlook published on the same day states that these measures give “back just over a quarter of the sums raised via income tax threshold freezes and the NICs rate rise that were announced last year and take effect in April” 2022. Moreover, the fact that the income tax base in relation to the promised income tax rate cut is different from the NICs tax base subject to the NICs increase from April 2022 (which will turn into the health and social care levy from April 2023) would effectively mean a shift of the tax burden towards employment. Whether all of this is good tax policy-making is open for debate.
In terms of business taxes, not much was announced. The government is bringing forward the introduction of certain business rates reliefs for green investments by one year. The Chancellor also referred to the already announced changes to tax incentives for research and development for which draft legislation will be published in the summer 2022 and mentioned possible changes to the capital allowances regime which the government will consider ahead of the expiry of the super-deduction. The intention is to engage with “business organisations and other interested parties from now until the Autumn”, although the details of such engagement do not seem to have been publicised yet.
The Chancellor’s speech also mentioned the publication of a “tax plan” – which I (perhaps naively) imagined would look a bit like the fully comprehensive corporate tax road map published back in 2010, except that it would cover a broader spectrum of tax measures. Having now seen the plan, it amounts to hardly more than a list of the tax-cutting announcements of the day, interspersed with a few pictures, and importantly does not reference all the previously announced tax changes. The planned rise in NICs from April 2022 (to be replaced by the health and social care levy from April 2023) and the planned corporation tax rate increase from April 2023 are just two obvious omissions from the timeline on page 10. As a “tax plan” this is rather disappointing and, overall, I would say that the spring statement did not live up to the hype that preceded it.