Summary
The Chancellor has announced his Spring Statement. As part of this, Mr Sunak set out what is called the government’s Tax Plan. This three-part plan is, he claims, designed to strengthen our economy. It will help families with the cost of living, it will support growth and it will ensure the proceeds of growth are shared fairly.
In summary, the key points which affect businesses are:
Employment allowance: this is to increase to £5,000 from April 2022.
Capital investment: A plan to cut and reform taxes on business investment. There will be consultation on how best to do this and the plans will be announced in the autumn Budget.
Ideas: A reform of tax relief on Research and Development, involving spending a further £5 billion per annum on supporting R&D. The Spring Statement confirms the plan to allow data and cloud computing costs to be included in R&D tax credit claims, refocuses relief on UK-based R&D only, and to support R&D supported by pure maths. There will be consultation on more fundamental changes to the R&D tax credit system with the new regime announced in the autumn 2022 Budget.
Timeline
The Tax Plan sets out the following timeline of key dates.
March 2022 fuel duty cut by 5p litre from 6pm on 23 March
April 2022 cut taxes on small businesses by up to £1,000, by raising the Employment Allowance to £5,000
July 2022 Aligning the NI threshold and lower profits limits with income tax personal allowance, making the first £12,750 of earnings tax free
April 2023 reform of capital allowances and R&D tax reliefs
April 2024 basic rate of income tax cut from 20% to 19%
Conclusion
We welcome the review of R&D tax credit relief as argued for in my last blog. Noticeable by its absence was anything like a windfall tax on energy companies’ profits. As expected, the NHS levy (increase in NI) has been kept, but to some extent will be compensated for by the alignment of NI with income tax thresholds.
