Gift Aid relief will be kept at 20% for a three-year transition period until April 2027.
For the year ahead, Sunak increased the National Insurance threshold from £9,980 to £12,570 from July, saving typical employees £330 per year, and increased the Class NICs (National Insurance Contributions) threshold for self-employed people, who may save up to £165 per year from April onwards.
Caroline Colliston, tax partner at DWF, said: ‘Aligning NICs and income tax is good but NICs have gone up with the health and social care levy.
‘However, the income tax personal allowance is frozen for 22/23―the government wins given the trajectory of inflation. The Taylor Review and House of Lords review of IR35 called for greater alignment of income tax and NICs but it is technical and challenging to achieve’.
Jon Stevens, global deputy head of tax & private capital at DWF, said: ‘While the increase of the NICs thresholds to align with the income tax personal allowance continues to narrow the tax base, could it make it easier to merge income tax and NICs in the future?
‘The increase in the rate of NICs (to be replaced with the Health and Social Care Levy) and the reduction in the basic income tax rate from 2024 favours unearned income over earned income, something that already needs to be addressed in our current system.’
Sunak announced a 12-month fuel duty cut of £0.05 per litre for petrol and diesel, a freeze on alcohol duty, a £500m boost to the Household Support Fund to help families buy food and clothing, a £200 household energy loan to be paid back over five years, and a small change to the Universal Credit taper rate.
For businesses, the Employment Allowance relief, which allows eligible employers to reduce their NICs bill, rises £1,000 to £5,000. Green technology such as solar panels and heat pumps are exempt from business rates from April, 100% relief is available for eligible low-carbon heat networks, and VAT on energy saving materials is reduced from 5% to 0%.
Tax credits for research and development will include storage of data and pure maths research to boost AI, robotics, manufacturing and design.
DWF partner Caroline Colliston said: ‘Employers who rely on employees running cars are going to face pressures as the approved mileage allowances for tax purposes remain unchanged.
‘Also employers asking for employees to return to work will face cost of living push back with commuter costs rising even before the current crisis. A real challenge for business.
‘Corporation tax rises from next year and employer NICs costs are rising this year which means no tax cut for business. We need business to be strong for sustained employment and growth. All of this is against a backdrop of c.23% increase in corporate insolvencies in February.’
Sunak said the Treasury will be speaking with business groups until the autumn about potential policy changes to the capital allowances regime to be made in April 2023.
Law Society president I Stephanie Boyce said: ‘We are keen to engage with the government over the plan to help design a tax system that works for legal services and allows us to get on with supporting people and businesses across the economy.
‘We also welcome plans to explore whether the current tax system―including the operation of the Apprenticeship Levy―is doing enough to incentivise businesses to invest in the right kinds of training, an issue we have previously raised.’
Rebecca Fisher, partner in the private client team at Russell-Cooke, said: ‘This Statement was exactly what everyone thought it would be―trying to help with the current cost of living crisis.
‘It seems another statement passes with no really punchy tax measures to pay for the pandemic and record borrowing. Many thought it was coming but the Ukrainian war, the 30-year inflation high and exponential rises in the cost of living means this may not be an immediate priority. I am sure it will come in time. The question is when.’
