Kevin Sefton, CEO of untied provides his thoughts on chancellor Rishi Sunak’s 2022 Spring Statement and looks at the implications of national insurance and income tax alignment:
“A key tax announcement was the commitment that national insurance thresholds will align to the income tax threshold, and explicitly “to fully equalise the NIC and income tax thresholds so that from this July people will be able to earn £12,570 without paying a single penny of income tax or national insurance.”
“In his statement, the Chancellor only mentioned the impact on employed people, but the strength of these words implies that it will apply to everyone who pays national insurance including self-employed.
“If carried through, this also invites the potential to significantly reduce the administration of self-assessment for lower earning self-employed people. This is important with the introduction of a new way of tax reporting from 2024 called Making Tax Digital for Income Tax.
"We look forward to seeing details, and what it also means for voluntary contributions which self-employed people can make in order to protect their access to a pension on retirement. These are a complication for many who are new to the tax system.
"We also note that national insurance is already due to rise from April by 1.25% (which works out at 2.5% for many employed people as it applies to both employer and employee contributions); in due course this will become the health and social care levy - though those arguing for simplicity may prefer not to add another type of tax and rules that go with it."
Other – self-employed people
"Self-employed people and smaller companies will be disappointed that while Help to Grow was mentioned, there was no extension of the training and software support funding to support them – even though self-employed are among those being mandated to move to new software as part of the Making Tax Digital for Income Tax changes, and where the government has indicated that there is wider economic benefit in them doing so."
"The 5p cut in fuel duty will be widely welcomed and we expect that the 5% VAT reduction on the installation of exchanges and solar panels will help as the country moves away from gas boilers. We note that VAT on domestic electricity even when generated from entirely renewable sources remains at 5%."
"We are not economists, but the chancellor gave an indication of how all of this is being funded in his opening lines where he talked about inflation hitting 7.4%. The direct effect is to increase VAT and other takings, and if earnings also increase, that will bring more people into higher tax bands. And thereby giving freedom for a 1p cut in the basic rate of income tax from 2024."
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