The Chancellor Rishi Sunak gave his Spring Statement budget update to Parliament yesterday (23rd March). IN case you missed it here are the main highlights:
- The biggest news is the increase in the National Insurance threshold to bring it into line with the Income Tax thresholds. This means that it will increase from £9,880 to £12,570 an increase of £2,690, which is worth £330 in the pay packet. This is the biggest increase in the threshold ever seen. It will come into effect in July and benefit over 30 million people. However, the 1.25% increase in National Insurance Contributions announced in the last budget will remain, which goes someway to offset the benefits of this increase in the threshold. Giving with one hand but taking away with another.
- The Chancellor then announced a cut in fuel duty by 5 pence per litre taking effect at 6pm. Whilst welcome, this doesn’t go a long way to alleviate the increase in petrol costs over the last few weeks as a result of the Ukraine war. It’s also worth noting that despite the cut fuel duty is still 53 pence per litre, so you could argue that a 5 pence cut was a relatively small concession.
- Finally, he announced that the basic rate of tax would be cut from 20 pence to 19 pence in the pound. However, this would not happen until 2024 at the earliest. The Chancellor said he was able to announce this in advance because forecasts expected growth to rise and inflation to fall over the next few years. Of course, it remains to be seen if this is the case.
Generally, the statement hasn’t been well received. In the face of serious increases in the cost of living many commentators have said that the changes announced don’t make a great deal of impact when you consider them alongside the tax rises imposed over the last few years. The Chancellor has argued that previous rises were as a result of the unexpected global pandemic and its effect on the economy.
It was probably always going to be the case that there would be financial pain after lockdowns, the question is how long will it last?
The biggest impact is of course the dramatic increase in the rate of inflation, currently at a 30 year high of 6.3%. This is directly affecting the cost of living, eating into savings and household income alike. Inflation is very difficult to counter even when you have Financial Planners working on your side.