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PwC Media Briefing: NIC increases, frozen tax thresholds, climate reporting, youth employment, and stablecoin’s huge potential

06 Apr 2022

This week’s topics: 

  • April’s personal tax changes: what impact will they have? 

  • Why a proactive approach to Climate-related Financial Disclosure is good for business.

  • Stablecoin - how the state-backed asset is ready to take off in the capital markets

How April’s tax changes will impact households

Today (6 April) the higher rates of National Insurance Contributions come into effect, increasing the National Insurance Contribution by 1.25 percentage points. Inheritance tax, stamp duty, income tax, dividend thresholds, starting rates for savings, personal allowance thresholds, pensions lifetime allowance and many more have all been frozen by recent Chancellors, with incoming ones choosing not to reverse the measures. This means more people are paying more tax.  

Christine Cairns, personal tax expert at PwC UK, comments:

  • Despite the introduction of the 1.25% Health and Social Care Levy from 6 April, the increase in the national insurance threshold will mean that people earning up to £9,880, and those earning up to £12,570 in July 2022, will see a lift in their paychecks. 
  • People who have had a pay increase from their employers in response to inflation could be pushed into higher tax bands as a result of the frozen income tax thresholds, leaving them less able to keep up with increasing prices of goods and necessities. The freezing of income tax thresholds will start to squeeze households, with even the cut in the basic rate band from 2024 not compensating for this year on year.
  • The dragging effect of frozen tax thresholds means people end up with less money in their pockets year on year.  For example the nil rate band for Inheritance Tax (IHT) has been frozen at £325,000 since 2009, while average house prices have increased dramatically over that same period. Had IHT not been frozen, and instead rose in line with inflation, the threshold would be £478,078 from today, meaning anything up to that amount could be passed on tax free. The IHT freeze is just one example of how more and more mid to lower income households will be pushed into paying more tax as prices rise. 
  • If the entry stamp duty threshold had increased in line with inflation or house prices instead of being frozen since 2006, it would be £60,000-£90,000 higher today, creating at least a £1,100 saving for anyone buying a property for £250k. This saving would be higher for properties worth more than £250k, where stamp duty rates are higher.

Why businesses will benefit from a proactive approach to TCFD

From today (Wed 6th April 2022) mandatory reporting against the Task Force for Climate-related Financial Disclosures (TCFD) comes into effect for more than 1,300 large businesses. But for those businesses not strictly required to be compliant, there are reasons why a proactive approach would be beneficial.

Tom Loukes, partner in the ESG reporting advisory team at PwC UK, comments:

  • TCFD gives investors and wider stakeholders transparency in relation to the extent that climate change impacts an organisation.
  • With investors and banks now forced to consider the impact of climate change on their long-term investments, more businesses are becoming proactive about climate-reporting.
  • It is less about arbitrary reporting, and more about building trust and confidence in how a business is managed. 
  • Understanding how climate change will impact businesses in terms of operations, customers and suppliers will be central to business decisions that are made. I have seen examples of businesses taking u-turns on strategies as a result of implementing TCFD.

Stablecoin - how the state-backed asset is ready to take off in the capital markets

Cryptoassets - a type of digital currency - have existed as a concept for over a decade, yet, in the past four years we have seen a sharp increase in their adoption. In line with the increasing complexity and popularity of cryptocurrency as a whole, this week we released our Stablecoin Overview 2022, which provides a synopsis of the key trends and developments of this crypto asset. 

Haydn Jones, director and senior blockchain market specialist at PwC UK, comments:

  • As of February this year, the value of stablecoin has surpassed $180bn. This highlights the popularity and adoption of the cryptocurrency, and conceptually, we are now at a point where the stablecoin design can be extended into conventional areas such as equity capital markets. 
  • Currently, stablecoin is not fully regulated, however the potential could be huge - for example playing a major role in cross border payments.
  • In the UK, stablecoins are not subject to regulation unless they have the characteristics of e-money or a security, so the regulatory status will depend on the structure and arrangement of the stablecoin. The UK government is already making headway in regards to regulation, and in 2021 HM Treasury consulted on establishing a new regulatory framework for stablecoins which is expected to be released this year. 
  • Our report highlights the increasing use of stablecoin throughout different sectors and industries, and we are continuing to work on numerous stablecoin projects globally, supporting central banks and private companies to assess and launch stablecoins. While we are pleased to see regulation taking a step in the right direction, we urge businesses to assess and understand the design, use and deployment of stablecoin to enhance their future business prospects. 

 

Something to read:

PwC’s Youth Employment Index, in collaboration with Youth Futures Foundation, has found that the UK has risen from 20th to 18th in global rankings - but could benefit from £38bn GDP boost if NEET levels are lowered to same level as Germany 

Something to listen to:  

Catch up on this twitter space where Head of Influencers at COP26 Eleanor O’Keeffe talked to Leo Johnson, PwC’s Disruption lead, about climate tech, the green energy drive and policies to support start-ups. 

Something to watch:

On International Transgender Day of Visibility, Head of Audit Hemione Hudson concluded our IWD #BreakTheBis video series by interviewing Katie, a colleague who discussed her transitioning journey. Katie talks about what it was like to share her new identity with her clients, colleagues and family - as well as how life has been since.

 

Ends

About PwC

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