Spring Statement 2022 – Mixed Reaction to Chancellor’s Announcement Comment from Azets on Impact on Business

Comment 1:

David Hedges, Partner and Head of Employment Taxes at Azets, the UK's largest regional accountancy and business advisors to SMEs and Top 10 accountancy firm, comments on today’s Spring Statement:

“The Chancellor has stated the Employee National Insurance starting threshold will rise to £12,570 from July 2022 with no employee NI paid below that sum. This helps employees but there was no mention on the employer threshold. However, the Employment Allowance for employers will rise by £1,000 to £5,000. The eligibility for Employment Allowance is where an employer’s NIC liability is less than £100K in the previous tax year.  This will be a helpful easement for small employers which goes some way to mitigate the fact that there is  no change in the Employer National Insurance threshold and which the Chancellor estimated will benefit around half a million SMEs.

"We welcome the planned discussions on reliefs such as training, qualifications and R&D tax credits, but for SMEs, these measures in combination as well as the temporary cut in fuel duty are unlikely to fully mitigate the inflationary impact of the Health and Social Care levy from April 2022.  This means there will  be more pressure on SMEs from their employees to increase wages to offset the effects of increased inflation -  which is predicted to rise to 8% this year - in order to retain valued staff.   The tax cuts outlined for 2024 are welcome, but SME employees are struggling with steeply rising living costs now.  We would urge the Chancellor to go further in his support particularly for the SME community. Faced with such increases and challenges, employers may want to think about the way in which they engage employees.   Over the course of the last two years we have seen an increase in so called “agile working” and employee home working. This is proving attractive to many employees who would like to combine their personal and business lives more effectively whilst employers may be able to reduce overhead costs. Some encouragement to accelerate this would have sent a positive message to employer and employee alike.”   

Comment 2:  

Praveen Gupta, National Head of Tax at Azets commented:-

“Following widespread speculation that the Chancellor would reduce tax on fuel and energy, there is some good news for individuals and businesses in the decision to cut fuel duty by 5p per litre and incentivise investments in green energy. However, I believe there was scope for the Government to be bolder and offer even greater financial support, given the rate at which prices are rising.

“Whilst he did not reverse the planned increases to National Insurance contributions (NICs), which would put an even greater squeeze on families and UK SMEs, the announced £3,000 increase of the National Insurance threshold will offer some relief to employees. Businesses had hoped for a complete U-turn on the 1.25% NICs increase, which might have been achieved with the Government having received record tax receipts across the board in 2021.

“We welcome the Chancellor’s pledge to cut tax rates on business investment in his Autumn Budget, as SMEs continue to have a significant role in driving the UK’s economic recovery from the pandemic, despite ongoing disruption to supply and rising costs. However, existing schemes such as the super-deduction have so far been underutilised and we would encourage the Government to extend incentives for investment in key areas such as R&D, innovation, and technology sooner rather than later.”