Overall, the Spring Statement 2022 was relatively quiet for contractors and self-employed workers. In this post, we look at the key areas that contractors need to know about.
No detail on the Single Enforcement Body to regulate umbrella companies
There was no reference in the Spring Statement to the SEB, which the Treasury’s Lucy Frazer has previously said in her March letter will be “brought forward when parliamentary time allows.” It’s disappointing that there is still no meaningful information or timelines about the Single Enforcement Body.
No move, yet, to extend IR35 reform to small companies
A positive is that currently there has been no move to extend IR35 rules beyond medium and large-sized companies to small companies.
Raise in NI threshold
The chancellor announced the National Insurance threshold will align with the personal tax-free allowance of £12,750 from July 2022, essentially giving an extra £330 a year.
£161m to HMRC for tax enforcement
The chancellor offered £161million investment to HMRC for compliance resources over the next 5 years. According to Qdos, the number of tax investigations jumped by nine percent in the six months up to December 2021. Contractors should be on their guard against investigations, particularly following the end of the soft-landing of IR35 this April.
inniAccounts CEO, James Poyser
Spring Statement Key Points:
- The income threshold for at which point people start paying National Insurance will rise to £12,570 in July, which the chancellor said was a tax cut for employees worth over £330 a year
- He pledged to cut basic rate of income tax by 1p in the pound before the end of this Parliament
- The Employment Allowance, which gives relief to smaller businesses’ National Insurance payments, will increase from £4,000 to £5,000 from April. There is certain eligibility criteria to meet when claiming the Employment Allowance.
Fuel, energy and living costs
Millions of households are facing a 54% rise in the cost of a typical annual gas and electricity bill when the regulator’s new, higher price cap takes effect on 1 April. The average price of petrol has risen by more than 40p per litre since last year’s Spring Statement.
The chancellor said he had already taken “decisive action”, in helping people with their bills. This includes a £150 council tax rebate for 80% of households, followed by a £200 discount on bills in October which will need to be repaid, and an expansion to a support scheme for vulnerable people.
- Fuel duty will be cut by 5p per litre until March 2023.
- Homeowners installing energy efficiency materials such as solar panels, heat pumps, or insulation will see VAT cut on these items from 5% to zero for five years
- Local authorities will get another £500m for the Household Support Fund from April, creating a £1bn fund to help vulnerable households with rising living costs
Economy and public finances
The Office for National Statistics (ONS) said prices rose by 6.2% in the 12 months to February – the fastest for 30 years.
- The UK economy is forecast to grow by 3.8% this year, according to the Office for Budget Responsibility (OBR), a sharp cut from its previous prediction of 6.0%
- The economy is then forecast to grow by 1.8% in 2023, 2.1% in 2024, 1.8% in 2025 and 1.7% in 2026
- The annual inflation rate was 6.2% in February, and is likely to average 7.4% for the rest of this year, but with peak of 8.7% in the final quarter of 2022
- The unemployment rate is now predicted to be lower over the next few years than in the OBR’s previous forecast in October