Events have conspired against the lowkey nature of the Chancellor’s Spring Statement.
The Ukraine invasion, steep increases in the cost of living and lower than forecast borrowing led to many hoping for major announcements. Highlighting the need for domestic economic stability in a volatile geopolitical landscape, Rishi Sunak laid out the facts:
- Higher global energy, metals and food prices pose risks to the outlook for inflation, consumer spending and production.
- The economic recovery over the past year has exceeded expectations, with GDP growth of 7.5% in 2021.
- The Ukraine invasion, and the resulting effect on global markets, will inevitably have an adverse effect on the UK economy and the cost of living over the short term.
The Chancellor stressed that any support the Government could give must be fiscally responsible.
What did the chancellor announce?
The chancellor made a few announcements but the most pertinent for many were:
- A temporary cut to duty on petrol and diesel of 5p per litre until March 2023.
- From 6 July 2022, the annual National Insurance Primary Threshold and Lower Profits Limit will increase from £9,880 to £12,570 meaning someone who is not paying any income tax on their salary should not pay any national insurance.
- From April 2024, the basic rate of income tax is planned to reduce from 20% to 19%.
How could this affect my financial planning?
The following considerations spring to mind:
- Business owners might want to consider paying themselves at least £12,570 in salary before considering dividends.
- Those who may be considering encashing investments such as investment bonds or taking money out of pensions might want to delay this until the rate of income tax drops.
- Basic rate taxpayers might want to pay into pensions now rather than later as the rate of tax relief they will get will reduce.