Spring Statement – March 2022

 

We have summarised the key announcements from the Chancellor’s Spring Statement on Wednesday, here.

The analysis on the main points are as follows:

National Insurance

The threshold where Class 1 primary (employee’s NI contributions) and Class 4 (self-employed NI contributions) become payable will increase from £9,880 in the 2021/22 tax year to £12,570 in July-22.  Yes, that’s a threshold change part-way through a tax year!

As such there will be a three month period in the 2022/23 tax year (April to June-22) where the threshold will remain at the 2021/22 level before increasing.

From July-22, this change will bring the NI threshold in line with the personal allowance for PAYE.

You may feel that this would start to make tax-planning for owner managed companies simpler, however, the Class 1 secondary (employer’s NI contributions) will remain at £9,100.

And so, the most tax-efficient the level to pay directors through payroll on a monthly basis will be………well, it will all depend on the company’s and the individual’s circumstances.

We will be reviewing this on a business by business basis to optimise the tax position.

5p fuel duty

This “tax cut” is a bit of a misnomer considering the 5p/litre reduction brought fuel prices back to where they were on Monday!

What is does highlight again is that electric cars need to be higher on the agenda from a tax-planning point of view.

They are a no-brainer when it comes to tax-saving and planning.  Here are just some of the main benefits:

• Electric vehicles get a 100% write off against tax.
• The benefit in kind charge (the figure that the individual gets taxed on) is 2% of the vehicle list price for 2022/23 and will be held at that rate until 2024/25.  For a £50k vehicle, this means that the taxable benefit will be £1,000 which equates to a £400 tax bill per year for a higher-rate taxpayer.
• All running costs for the vehicle can be run through the business with full write offs.
• Electricity isn’t classed as a fuel for benefits in kind – so the business can “fill up” the electric car with no tax charge on the individual.
• You can claim the cost of charging the vehicle against the business’ profits in full

Research & Development and Capital Allowances

The Chancellor has heavily hinted that in the Autumn statement, there will be a complete review of R&D and capital allowances.

This could see improvements to the current R&D regime and also possibly specific allowances for certain sectors.

Sectors that have suffered heavily recently, retail, haulage, farming etc., could be the early targets for better tax reliefs.

Currently, there’s a “one fits all” approach for both but there’s a high chance that change is on the horizon – watch this space!