Spring Statement 2022 Predictions
Author Rachael Ball FCCA, LHP Associate
COVID and a downturn followed by a bounce-back with inflation throws a question mark over tax announcement predictions this Spring Statement on 23 March. With all that is happening, will Rishi postpone tax plans? Will tax policy address the UK’s cost-of-living crisis?
Health and Social Care Levy
Boris and Rishi are currently publicly sticking to plans to introduce a Health and Social Care Levy to help the NHS catch up after COVID (essentially a ‘jobs tax’ increase in NIC). The Chancellor has announced a direct support package for households facing increasing fuel bills perhaps indicating there will be no big announcements on 23 March unless tax cuts are suddenly deemed essential.
NIC for lower earners
While we shouldn’t expect Rishi to cancel or delay the Levy (HSCL), he might tweak it to reflect the cost of living. He could reduce normal rate of NIC for lower earners so they pay the levy but with no net difference in pay from April, likely this would be bad news in terms of NIC increases on high earners to balance books.
As further interest rate increases predicted add to Government borrowing via COVID support, reducing public spending or putting up taxes could amplify the knock on impact for household income and consumer spending, which could pose a threat to the economy.
Spending cuts unlikely
The impact of inflation on government budgets means spending review targets may see widespread spending cuts unlikely. With high employment, inflation pushes up tax revenues in for example VAT receipts on fuel, even if tax revenues are hit in other areas. A question to ask is, will those who can afford to take the hit to contribute more be asked to do so?
Personal tax changes
Aside from potential NIC adjustments, personal tax changes are one route Rishi could take. The Chancellor has had the opportunity to overhaul CGT and IHT but didn’t in the last budget. But will he continue with this? The idea of a wealth tax is still widely discussed but not popular with many.
The Spring announcement may well say little as financial and political volatility makes it hard. Perhaps some changes will appear in the Autumn 2022 Budget. In times like these it’s hard to use our crystal ball.
Possible tax announcements
Tax that tackles ‘cost of living’ could appear this Spring Budget. The rises SME businesses are facing recovering from COVID has dealt them rising costs of materials, transport, energy , NIC, minimum/living wage and reduced consumer spending challenges. Will this issue create tax announcements?
Online sales tax
The idea of an online sales tax to level up fairness between online retailers and the high street was mentioned last Budget. The Chancellor pre-empted the Spring Statement by publishing a formal consultation on the idea in February.
Global minimum tax proposals
The Government has been consulting on global minimum tax proposals signed up to through OECD’s Digital Economy project. The Chancellor could celebrate this as a move towards fair taxation of large multinationals.
A windfall tax
Will talk of a windfall tax on energy companies amount to anything (used to fund energy price subsidies). Talk is widespread but has implications and is not conventional as an approach. But it would be popular with voters…
R&D tax relief
Good news for businesses may come in changes to R&D tax relief as part of the government’s ongoing review. As reforms that have already been announced refocus R&D relief on UK based activity , it is hoped new proposals will make the relief more cost-effective for all forms of R&D to be carried out in the UK. There may be proposals for some form of regional based supplement to the rate of R&D to encourage more activity in areas of the UK that need ‘levelling up’.
Cutting VAT on petrol/diesel
Cutting VAT on petrol/diesel could be an option for the Chancellor. The government raises revenue from fuel pumps in 2 ways. There is a flat fuel duty charge of 57.95 pence per litre and VAT is 20% levied on the total cost of fuel plus duty. The VAT on fuel has been long contested, perhaps the Chancellor will see scope for manoeuvre there.
Tune in on Twitter on March 23!
Our LHP tax team will be live tweeting on spring budget day and we will be publishing a budget summary and 2022-23 tax booklet for you too. For any questions, drop us a line on Let’s Talk.