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The Chancellor's Spring Statement 2022

A road map for the economy?

On 23 March 2022 the Chancellor of the Exchequer delivered his Spring Statement. Whilst this was originally not intended to be a fiscal event, there were a number of tax announcements made. In addition, the Chancellor published a “Tax Plan” for the remainder of the Parliament.

Here is a summary of the most important announcements:

Outcome summary

Personal tax, employment and NICs

  • National Insurance thresholds – The annual National Insurance Primary Threshold and Lower Profits Limit, for employees and the self-employed respectively, will increase from £9,880 to £12,570 from July 2022.
  • Basic rate of income tax – The Government will reduce the basic rate of income tax to 19% from April 2024.
  • Employment Allowance – The Employment Allowance will increase from £4,000 to £5,000 from April 2022, meaning eligible employers will be able to reduce their employer NICs bills by up to £5,000 per year.
  • Review of Apprenticeship Levy – in the Tax Plan the Government said it would explore whether the current tax system – including the operation of the Apprenticeship Levy – is doing enough to incentivise businesses to invest in the right kinds of training.

VAT and indirect taxes

  • Temporary cut to fuel duty – The Government will cut the duty on petrol and diesel by 5p per litre for 12 months. This will take effect from 6pm on 23 March, across the UK.
  • VAT relief for energy saving materials (ESMs) – The Government will introduce a time-limited zero rate for the installation of ESMs from April 2022. In addition wind and water turbines will be added to the list of ESMs and the complex eligibility conditions will be removed. This will not apply in Northern Ireland.

Business Taxes

  • R&D tax relief reform – The Government has confirmed that R&D tax reliefs will be reformed to include some cloud and data costs and refocus support on R&D carried out in the UK. Two extensions from the previous announcements are that (i) all cloud computing costs associated with R&D, including storage, will qualify for relief; (ii) some overseas costs will be eligible for relief; and (iii) the definition of R&D will be expanded to include pure mathematics as a qualifying cost. Legislation will be published in draft and included in the next Finance Bill, and will come into effect in April 2023.
  • Relief for capital investment – The Government is considering how to give tax relief for future business investment, after the super-deduction ends in April 2023, and will consult with businesses. The Government’s priority is said to be to ensure that any future relief is effectively targeted. Possibilities include partial first year allowances or increased writing-down allowances for general plant and machinery, or targeting higher relief at specific types of expenditure. An announcement will be made in the Budget in Autumn 2022.

Tax Reform

  • The Chancellor’s Tax Plan brings together some of the announcements under the themes of:
    • Helping families with the cost of living;
    • Creating the conditions for private sector led growth (focusing on capital, people and ideas);
    • Sharing the proceeds of growth (ie the proposed income tax reduction).
  • The Government will also look to reform and simplify the tax system, highlighting in particular that there are over 1,000 reliefs and allowances, which adds to the complexity of the system. There will be a review and an announcement made by 2024.

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Laura Hinton

Laura Hinton

Tax Leader, PwC United Kingdom

Tel: +44 (0)7956 267671

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Alice Bowdery

Manager, media relations, PwC United Kingdom

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