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While there were several measures which seemed to alleviate some of the economic hardships of the population - in the main these were counter-balanced with measures to claw back the tax which the Government so desperately needs post-pandemic.
There was a welcome in the rise in the NI threshold by £3,000 - but a sign of disappointment that the proposed 1.25 per cent NI increase will go ahead as planned in April 2022.
A fall in income tax was welcomed - but not the wait until 2024.
In summary, the small business world continued to feel left behind and left out.
Some of the measures in the Budget and the reaction from freelancers and the contractor community are given below:
Qdos - rabbit from hat
Seb Maley from tax advisers, Qdos said: “The Chancellor may have pulled a rabbit from his hat with the one per cent cut to income tax, but the reality is, by 2024, it could be too late. What’s more, this headline-grabbing measure will do little for limited company owners who slip through the cracks – just as they did during the pandemic.
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“Having been hit hard by recent tax reforms, relieving at least some of the recent tax burden will come as a relief to small business owners who were likely fearing the worst.”
CIOT - 'Swings and roundabouts
Chartered Institute of Taxation said that the Spring Statement would leave taxpwyers 'dizzy' as two of the Chancellor’s headline announcements - the alignment of the income tax and national insurance thresholds, and the future reduction in the basic rate of income tax - suggest conflicting approaches to the two taxes.
The Chancellor announced that, from July 2022, the national insurance annual primary threshold and lower profits limit would be increased to the equivalent of the income tax personal allowance of £12,570. The Chancellor also announced that, from April 2024, the basic rate of income tax would be reduced to 19 per cent.
These announcements come on top of the already planned increase in the national insurance rate next month and ongoing real terms cuts in the income tax personal allowance as it remains frozen for five years.
John Cullinane from the CIOT said: “We welcome the alignment of the income tax and national insurance thresholds. Not only will this represent a welcome boost for those on lower incomes, it also brings some much-needed simplification to the tax system.
“However, it does appear to illustrate different approaches to each of those taxes. On income tax, the personal allowance has been frozen at its current level until April 2026, a real-terms cut when the cost of living is factored in. Similarly, the rate of tax is also being cut.
“In contrast, the national insurance threshold is being increased significantly. But prior to that, the rate is also increasing by 1.25 per cent, to fund expenditure on the NHS, health and social care in the UK. So, for income tax on the one hand, thresholds and rates are reducing, but for national insurance on the other they are increasing. The approach on national insurance seems the most progressive, taking the lowest paid out of the levy, whereas on income tax even high earners will benefit from the reduction in the basic rate.”
“Keeping up with all these swings and roundabouts will make most ordinary taxpayers dizzy.”
Accountancy Partnership - More support
Lee Murphy from business finance experts, The Accountancy Partnership called for more support for SMEs as the country recovers from Covid and the rising cost of living.
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“Efforts to address the cost of living crisis through the tax and national insurance (NI) system fall short against record inflation rates. Plans for an increase in National Insurance contributions will go ahead, however, the threshold has been increased to £12,570, which will benefit businesses with lower income earners.
“The increase to the National Insurance threshold means that directors in their own limited companies can pay themselves a higher salary whilst remaining tax efficient. But it's crucial to remember the effects of the new Health and Social Care Levy, which will impact the amount of dividend tax they pay. Efficient tax planning is just as crucial as ever.
“The Employment Allowance increase to £5,000 will reduce employers’ National Insurance bills for small businesses that are planning to employ workers, which has the potential to stimulate job creation for those that employ two or more people. However, microbusinesses and sole directors that don’t employ enough people are omitted from the benefit.
“The cut to fuel duty on the surface is promising, however in practice, it will only reduce the cost of a tank of fuel by £2-3. Those small businesses that cover lots of miles will not see a real benefit, and it is still to be seen if there will be further rises in the cost of fuel due to the on-going war in Ukraine.
“Support for businesses facing soaring energy prices is also missing, putting further pressure on businesses’ operating costs. This is reflected in the FSB’s new research which found a worrying five per cent of businesses do not think they’ll survive the next three months. More must be done to prevent the price increase from being passed on to customers, further increasing inflation.
“The importance of small businesses to the economy must not be understated, they make up 99 per cent of all UK businesses and contribute trillions of pounds to the economy. SME owners have been disproportionately impacted by the pandemic and their demise will result in the loss of jobs and opportunities in many areas of the country. Greater expectation will be piled on to the budget in the autumn to support UK SMEs.”
Spring Statement 2022
For more information and expert analysis on issues relating to freelancers, contractors and small busiesses in the Spring Statement see Shout99's Political News section.
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Susie Hughes © Shout99 2022
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