Against a backdrop of rising inflation, Chancellor Rishi Sunak presented his first Spring Statement
on Wednesday 23 March 2022.
In his Spring Statement, the Chancellor announced a cut in fuel duty for petrol and diesel as he
sought to ease the impact of rising prices for households and businesses.
The Chancellor will lift the starting thresholds for National Insurance contributions (NICs). He also
pledged a cut to income tax in 2024. However, the Health and Social Care Levy will still be
implemented in April 2022.
For businesses, there is an increase to the Employment Allowance, as well as relief from business
rates on a range of green technologies and help with training and the adoption of digital technology.
You should contact us before taking any action as a result of the contents of this summary.
Increase in the National Insurance threshold and Lower Profit Limit
Chancellor Rishi Sunak announced an increase in the annual National Insurance Primary Threshold and the
Lower Profits Limit in his 2022 Spring Statement.
Primary Class 1 contributions are paid by employees. To align the starting thresholds for income tax
and National Insurance contributions (NICs) the threshold will increase from 6 July 2022 from
£9,880 to £12,570.
The Lower Profits Limit is the point where the profits of the self-employed become subject to Class 4
NICs. From 6 April 2022 the Lower Profits Limit is increased to £11,908 and from 6 April 2023 the
limit is increased further to £12,570.
In addition, there will be no Class 2 NICs on profits between £6,725 and £11,908. £3.15 per week is
payable where profits are over £11,908.
Temporary increase in National Insurance rates
From April 2022, there will be a temporary increase in the rates of NICs payable for employees,
employers and the self-employed as a transitional provision in readiness for the introduction of the
Health and Social Care Levy from April 2023.
With the increase to the thresholds announced in the Spring Statement, from 6 July 2022 employees
earning between £242 (£190 from 6 April to 5 July 2022) and £967 per week will pay NICs at 13.25%.
Earnings over £967 will attract a 3.25% charge. Employers will pay 15.05% on their employees’ earnings
over £175 per week.
Although employees’ NICs only become payable once earnings exceed £242 per week, any earnings between
£123 and £242 per week protect an entitlement to basic state retirement benefits without incurring a
liability to NICs.
For the self-employed, where their profits exceed £11,908 per annum, they will pay 10.25% on the
profits up to £50,270 and 3.25% on profits over that upper profits limit.
Income tax reduction
The Chancellor announced the reduction in the basic rate of income tax for non-savings, non-dividend
income for taxpayers in England, Wales and Northern Ireland to 19% from April 2024. This reduction will
not apply for Scottish taxpayers because the power to set these rates is devolved to the Scottish
The change will be implemented in a future Finance Bill.
In a measure announced in the Spring Statement to help all motorists – individuals, small businesses
and hauliers – fuel duty for petrol and diesel is cut by 5 pence per litre across the whole of the
UK. This measure took effect from 6pm on 23 March 2022 and is in place for 12 months.
Increased Employment Allowance
Employers are able to claim the Employment Allowance which reduces their employer Class 1
NICs each year.
In the Spring Statement, the Chancellor announced an increase from April 2022 of £1,000 for eligible
employers to reduce their employer NICs by up to £5,000 per year.
The allowance can be claimed against only one PAYE scheme, even if the business runs multiple schemes.
Connected businesses, such as companies under the control of the same person or persons, are only
entitled to one Employment Allowance between them.
VAT on energy saving materials
The Chancellor announced a UK wide, time-limited zero rate of VAT from April 2022 for the installation
of energy saving materials. This will apply to installations such as rooftop solar panels.
This is in addition to the extension of the VAT relief to include additional technologies and the
removal of complex eligibility conditions.
Green reliefs for business rates
The government is introducing targeted business rates exemptions for eligible plant and machinery used
in onsite renewable energy generation and storage, and a 100% relief for eligible low-carbon heat
networks with their own rates bill. It was announced in the Spring Statement, that these measures will
now take effect from April 2022, a year earlier than previously planned.
3. Personal Tax
The UK personal allowance, tax rates and bands for the tax year 2022/23 were announced by the
Chancellor in the October 2021 Budget.
The personal allowance
The personal allowance is currently £12,570 and will be frozen at £12,570 for the tax years to 2025/26.
There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The
reduction is £1 for every £2 of income above £100,000. So there is no personal allowance where adjusted
net income exceeds £125,140.
The marriage allowance
The marriage allowance permits certain couples, where neither party pays tax in the tax year at a rate
other than the basic rate, to transfer £1,260 of their personal allowance to their spouse or civil
The marriage allowance reduces the recipient’s tax bill by up to approximately £250 a year. To
benefit from the marriage allowance one spouse or civil partner must normally have no income or
income below the personal allowance for the year. The marriage allowance was first introduced
for 2015/16 and there are couples who are entitled to claim but have not yet done so. It is
possible to claim for the four years back to 2018/19 where the entitlement conditions are
met. The total tax saving for all years up until 2022/23 could be over £1,000. A claim for
2018/19 will need to be made by 5 April 2023.
Tax bands and rates
The basic rate of tax is 20%. In 2022/23 the band of income taxable at this rate is £37,700 so that the
threshold at which the 40% band applies is £50,270 for those who are entitled to the full personal
allowance. The bands of tax are also frozen for the tax years to 2025/26.
Individuals pay tax at 45% on their income over £150,000.
The tax on income (other than savings and dividend income) is different for taxpayers who are resident
in Scotland to taxpayers resident elsewhere in the UK. The Scottish income tax rates and bands apply to
income such as employment income, self-employed trade profits and property income.
In 2022/23 there are five income tax rates which range between the starter rate of 19% and the top rate
of 46%. The basic rate of tax is 20% and there is an additional intermediate rate of 21%. Scottish
taxpayers are entitled to the same personal allowance as individuals in the rest of the UK. The two
higher rates are 41% and 46% rather than the 40% and 45% rates that apply to such income for other UK
residents. For 2022/23 the threshold at which the 41% band applies is £43,663 for those who are
entitled to the full personal allowance.
Savings and dividend income are taxed using UK rates and bands.
From April 2019, the Welsh Government has the right to vary the rates of income tax payable by Welsh
taxpayers. The UK government has reduced each of the three rates of income tax paid by Welsh taxpayers
by 10 pence. The Welsh Government has set the Welsh rate of income tax at 10 pence which will be added
to the reduced rates. This means the tax payable by Welsh taxpayers continues to be the same as
that payable by English and Northern Irish taxpayers.
Tax on savings income
Savings income is income such as bank and building society interest.
The Savings Allowance applies to savings income and the available allowance in a tax year depends on
the individual’s marginal rate of income tax. Broadly, individuals taxed at up to the basic rate of tax
have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to
additional rate taxpayers.
Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the
rate is not available if taxable non-savings income exceeds £5,000.
Tax on dividends
The first £2,000 of dividends are chargeable to tax at 0% (the Dividend Allowance). For 2022/23 and
subsequent tax years the rate at which dividends received above the Dividend Allowance are taxed
has increased across all rates by 1.25% to the following rates:
- 8.75% for basic rate taxpayers
- 33.75% for higher rate taxpayers
- 39.35% for additional rate taxpayers.
Dividends within the allowance still count towards an individual’s basic or higher rate band and so may
affect the rate of tax paid on dividends above the Dividend Allowance.
To determine which tax band dividends fall into, dividends are treated as the last type of income to be
4. Business Tax
Making Tax Digital for Business: VAT
April 2022 sees the final phase of the introduction of the Making Tax Digital (MTD) for VAT regime. All
VAT registered businesses, regardless of turnover, will enter MTD for VAT from their first VAT return
period starting on or after 1 April 2022.
Businesses must keep digital records for VAT purposes and provide their VAT return information to HMRC
using MTD functional compatible software.
Keeping digital records will not mean businesses are mandated to use digital invoices and
receipts but the actual recording of supplies made and received must be digital. It is likely
that third party commercial software will be required. Software is not available from HMRC. The
use of spreadsheets will be allowed, but they will have to be combined with add-on software to
meet HMRC’s requirements.
HMRC is looking at a scenario where income tax updates are made quarterly and digitally under
the MTD for Income Tax Self Assessment (ITSA) from April 2024.
MTD for Corporation Tax (CT)
The Government is committed to ongoing collaboration with stakeholders on the service design and,
following any decision to mandate MTD for CT, will provide sufficient notice ahead of implementation
but this will not be mandated before 2026 at the earliest.
Corporation Tax rates
The main rate of CT is 19% for the Financial Year (FY) beginning 1 April 2022. This rate will increase
to 25% for the FY beginning on 1 April 2023.
If a company’s accounting period straddles more than one FY, the amount of profits for that accounting
period must be apportioned to arrive at the tax rate charged.
A small profits rate will be introduced for qualifying companies with no associated companies in the
accounting period and profits of £50,000 or less so that they will continue to pay CT at 19%. Companies
with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief
providing a gradual increase in the effective CT rate.
Plant and machinery
A further extension to the temporary increase in the Annual Investment Allowance (AIA) to 31 March 2023
allows 100% tax relief to businesses investing up to £1 million in qualifying expenditure.
The AIA reverts to £200,000 for expenditure incurred on or after 1 April 2023 and special rules apply
to accounting periods which straddle these dates.
First Year Allowances (FYA) for companies
For qualifying expenditure which is unused, not second-hand and is incurred on or after 1 April 2021
but before 1 April 2023 a super-deduction of 130% is available where the expenditure would normally
qualify for the 18% main rate of writing down allowance or a Special Rate Allowance of 50% for
expenditure which would normally attract the 6% special rate of writing down allowance.
For FYAs, what matters is the actual date on which the expenditure is incurred and not the date on
which it is treated as incurred.
Businesses incurring expenditure on plant and machinery should carefully consider the timing of
their acquisitions to optimise their cashflow. In 2023, not only will the tax relief rules
for expenditure on plant and machinery change, but for companies the percentage of CT relief on
that expenditure may change as well.
Preventing abuse of the R&D tax relief
From April 2023 a number of changes are proposed to the regimes from both existing schemes of
relief which will include the expansion of relief to cloud and data computing.
Claims for relief will have to be made digitally and more detail will be required within the
claim. Each claim will need to be endorsed by a named senior officer of the company and companies
will need to inform HMRC, in advance, that they plan to make a claim. Claims will also need to include
details of any agent who has advised the company on compiling the claim.
A temporary increase in cultural tax reliefs for theatres, orchestras, museums and galleries across the
UK will apply until 31 March 2024, increasing the relief organisations can claim as they invest in
new productions and exhibitions.
From 1 April 2022 changes will also be introduced to better target the cultural reliefs and ensure that
they continue to be safeguarded from abuse.
The Residential Property Developer Tax
The Residential Property Developer (RPDT) will be introduced on the very largest property
developers for accounting periods beginning on or after 1 April 2022.
Broadly RPDT is a charge of 4% treated as corporation tax on the profits of the residential
property developer over an allowance of £25 million in a 12-month period.
5. Employment Taxes
Employer provided cars
The scale of charges for working out the taxable benefit for an employee who has use of an employer
provided car are normally announced well in advance. Most cars are taxed by reference to bands of
CO2 emissions multiplied by the original list price of the vehicle. The list price is
reduced for capital contributions made by the employee up to £5,000.
For fully diesel cars generally add a 4% supplement unless the car is registered on or after 1
September 2017 and meets the Euro 6d emissions standard.
The maximum charge irrespective of the fuel, is capped at 37% of the list price of the car.
The rates announced for 2022/23 will remain frozen until 2024/25.
Employer provided fuel benefit
From 6 April 2022 the figure used as the basis for calculating the benefit for employees who receive
free private fuel from their employers for company cars is increased to £25,300.
Employer provided vans and fuel
For 2022/23 the benefit increases to £3,600 per van and the van fuel benefit charge where fuel is
provided for private use increases to £688.
Changes to the van benefit charge from April 2021 means that if the van cannot in any circumstances
emit CO2 by being driven the cash equivalent is nil.
National Insurance contributions (NICs)
In September 2021 the government published its proposals for new investment in health and social care
in England. The proposals will lead to a permanent increase in spending not only in England but also by
the devolved governments. To fund the investment the government will introduce a UK-wide 1.25% Health
and Social Care Levy based on the NIC system but ring fenced for health and social care.
From April 2022 the Health and Social Care Levy Act provides for a temporary 1.25% increase to both the
main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for 2022/23.
From April 2023 onwards, the NIC rates will revert back to 2021/22 levels and will be replaced by a new
1.25% Health and Social Care Levy.
Broadly, the new Health and Social Care Levy will be subject to the same reliefs, thresholds and
requirements as NIC. However the Levy (as opposed to the temporary increase in NICs for 2022/23)
will also apply to those above State Pension age who are still in employment or are self-employed.
Existing reliefs for NICs to support employers will apply to the Levy. Companies employing apprentices
under the age of 25, all people under the age of 21, veterans and employers in Freeports will not pay
the Levy for these employees as long as their yearly gross earnings are less than £50,270, or £25,000
for new Freeport employees.
The Employment Allowance, which reduces employers’ Class 1 NICs by up to £5,000, will also be
available for the employers’ liability to the Levy.
The Levy will be applied to those above State Pension age although this does not apply in
respect of the temporary increase from April 2022. The Levy will not apply to Class 2 (a flat
rate paid by many self-employed) and Class 3 (voluntary contributions for taxpayers to fill
gaps in their contribution records).
The burden of the 1.25% increase falls on the shoulders of the employer, the employee and the
self-employed as each will have higher contributions to make. Those with property income will
be relieved that they are not being included in the Levy.
National Living Wage (NLW) and National Minimum Wage (NMW)
Following the recommendations of the independent Low Pay Commission, the government will increase the
NLW for individuals aged 23 and over by 6.6% from 1 April 2022. The government has also accepted the
recommendations for the other NMW rates to be increased.
From 1 April 2022, the hourly rates of NLW and NMW will be:
- £9.50 for those 23 years old and over
- £9.18 for 21-22 year olds
- £6.83 for 18-20 year olds
- £4.81 for 16-17 year olds
- £4.81 apprentice rate for apprentices under 19, and those 19 and over in their first year of
In total, the annual gross earnings of a full-time worker on the NLW will have increased by
over £5,000 since its introduction in April 2016.
6. Capital Taxes
Capital gains tax (CGT) rates
The current rates of CGT are 10%, to the extent that any income tax basic rate band is available, and
20% thereafter. Higher rates of 18% and 28% apply for certain gains; mainly chargeable gains on
residential properties with the exception of any element that qualifies for private residence relief.
There are two specific types of disposal which potentially qualify for a 10% rate:
- Business Asset Disposal Relief (BADR) which was formerly known as Entrepreneurs’ Relief. This is
targeted at working directors and employees of companies who own at least 5% of the ordinary share
capital in the company and the owners of unincorporated businesses. BADR has a lifetime limit of £1
million for each individual.
- Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading
companies who have newly-subscribed shares. This has a lifetime limit of £10 million for each
CGT annual exemption
The CGT annual exemption is £12,300 for 2022/23 and will remain frozen until April 2026.
New reporting and payment on account obligations for chargeable gains on residential property were
introduced in April 2020. From 27 October 2021 the deadline to report and pay CGT after selling UK
residential property was increased from 30 days after the completion date to 60 days.
Inheritance tax (IHT) nil rate bands
The nil rate band has remained at £325,000 since April 2009 and is set to remain frozen at this amount
until April 2026.
IHT residence nil rate band
The residence nil rate band (RNRB) was introduced in 2017, meaning that the family home can be passed
more easily to direct descendants on death.
The rate of the RNRB is £175,000 for 2022/23.
There are a number of conditions that must be met in order to obtain the RNRB.
For many married couples and registered civil partnerships the relief which is
available following the second death can effectively be doubled as each individual has a main
nil rate band and a residence nil rate band which passes on the death of the surviving spouse.
A reduced rate of IHT applies where broadly 10% or more of a deceased’s net estate (after deducting IHT
exemptions, reliefs and the nil rate band) is left to charity. In those cases the 40% rate will be
reduced to 36%.
7. Other Matters
VAT rates and limits
The VAT registration and deregistration thresholds will remain unchanged for a period of two years from
1 April 2022.
The six-month extension to the UK-wide VAT reduction to 12.5% for the tourism and hospitality
sectors comes to an end on 31 March 2022 with rates returning to the standard rate of 20%.
Vehicle Excise Duty (VED)
With effect from 1 April 2022 the rates of VED rates for cars, vans, motorcycles, and motorcycle
trade licenses will increase in line with Retail Prices Index (RPI).
For heavy goods vehicles, VED continues to be frozen in 2022/23. The HGV Levy is suspended for another
12 months from 1 August 2022.
With effect from 1 April 2022 both the standard and lower rates of Landfill Tax will increase in line
with the RPI.