Fuel Duty Cut

To help motorists manage increasing fuel costs. Fuel duty was reduced by 5 pence per litre from 6:00 pm on 23 March 2022. The reduction was initially introduced for a period of one year.

Health and Social Care Levy

The government confirmed that the Health and Social Care Levy would proceed as planned from April 2022. This was implemented through a 1.25% increase in National Insurance Contributions (NICs) for employees, employers, and the self-employed during the 2022/23 tax year.

National insurance threshold increases

To offset the impact of higher NIC rates. The government announced increases to the thresholds at which individuals begin paying National Insurance.

Employees (Class 1 NICs)

From July 2022, the Primary Threshold increased to align with the income tax personal allowance, bringing the annual threshold to £12,570.

Self-Employed (Class 2 NICs)

From April 2022, the Class 2 NIC threshold increased to £11,908. Many self-employed individuals to retain more of their earnings before becoming liable for contributions.

The government estimated that approximately 70% of workers would pay less National Insurance. Overall during the final nine months of the 2022/23 tax year. However, individuals earning more than £34,923 annually were still expected to pay more NIC overall due to the levy increase.

Employment allowance increase

To support smaller employers, the Employment Allowance increased from £4,000 to £5,000 per year from April 2022.

The allowance is available to organisations whose employer Class 1 National Insurance liabilities were below £100,000 in the previous tax year. The increase enables eligible businesses to reduce their annual employer NIC liabilities by an additional £1,000.

Approximately 495,000 businesses were expected to benefit from the change, representing around 30% of UK businesses. The government estimated that approximately 50,000 businesses would be removed entirely from paying employer NICs and the Health and Social Care Levy.

Income tax changes

The government announced its intention to reduce the basic rate of income tax from 20% to 19% from April 2024. This measure was designed to provide longer-term tax relief for workers and households.

However, individuals who do not pay employee National Insurance, including many pensioners and those reliant on benefits, would not benefit from the NIC threshold increases and would need to wait until the income tax reduction took effect to see an increase in disposable income.

Support for households

An additional £500 million was allocated to the Household Support Fund, enabling local authorities to provide assistance to vulnerable households facing financial hardship and rising living costs.

Research and Development (R&D) relief reforms

The government confirmed several reforms to the UK’s R&D tax relief regime.

From April 2023:

• Tax relief for overseas R&D activities would generally be restricted.
• Limited exemptions would apply where overseas activity is required for regulatory reasons, such as clinical trials, or where geographical factors make UK-based activity impractical.
• Companies would be able to claim R&D relief for projects involving pure mathematics.

The government also announced a further consultation on R&D incentives, including consideration of increasing relief rates to maintain the UK’s competitiveness as a global innovation hub.

Capital allowances

With the super-deduction scheduled to end in April 2023, the government stated that it would explore alternative investment incentives to encourage business spending and capital investment.

VAT relief for energy-saving materials

To support energy efficiency and environmental objectives, the VAT rate on qualifying energy-saving materials was reduced from 5% to 0% for the period from April 2022 to April 2027.

Eligible installations include:

• Insulation
• Solar panels
• Wind turbines
• Other qualifying energy-saving technologies

Apprenticeship levy review

The government announced a review of the Apprenticeship Levy to assess whether the scheme is effectively helping employers invest in workforce skills and training.

Tax relief simplification

As part of its wider tax reform agenda, the government indicated that a number of existing tax reliefs would be reviewed, simplified, or potentially removed in the lead-up to 2024 to create a fairer and more efficient tax system.

Enterprise management incentives (EMI)

Following a formal review, the government concluded that the Enterprise Management Incentive (EMI) scheme remains effective and fit for purpose. No significant reforms were proposed.

Practical implications for employers

Employers and payroll providers faced two significant National Insurance changes during the 2022/23 tax year:

1. The implementation of the 1.25% NIC increase from 6 April 2022.
2. The increase in employee NIC thresholds from July 2022.

While employees benefited from higher thresholds, the increase did not alter the threshold at which employers begin paying employer NICs. Consequently, most employers did not see a direct reduction in employer NIC liabilities. Unless they qualified for the enhanced Employment Allowance.

The Spring Statement 2022 sought to balance support for households and businesses with the government’s commitment to funding health and social care services. Key measures included reductions in fuel duty, increases to National Insurance thresholds. Enhanced support for smaller employers, and reforms to R&D incentives and energy-efficiency tax reliefs. Businesses should continue reviewing their payroll processes, tax planning strategies. Eligibility for available reliefs to maximise the benefits of these changes.