The Spring Statement 2022; A Quick Breakdown

On 23rd March 2022, the Chancellor of the Exchequer Rt Hon Rishi Sunak released the Spring Statement. This statement has a lot to unpack, especially regarding earnings and savings, so here’s a quick breakdown of what was discussed. 

Pensions  

There were no changes to pension tax relief. 

The lifetime allowance remains frozen at £1,073,100 until April 2026. 

State Pension  

In recent years, State Pensions have been uprated each year by the higher of CPI, 2.5% and the average increase in earnings – known as the ‘triple lock’. For the tax year 2022/23, the earnings element has been suspended which means that, in 2022/23, State Pensions will increase by 3.1% (the September 2023 CPI figure). 

ISAs 

The 2022/23 annual subscription limits for adult and junior ISAs will remain at £20,000 and £9,000 respectively. 

Income tax 

In England, Wales, and Northern Ireland, the basic rate of income tax will fall from 20% to 19% from April 2024. This will apply to both non-savings and savings income. The trust rate will also reduce to 19% for the first £1,000 of income (the standard rate band).  

It was confirmed that the rate of tax for dividends will increase by 1.25% as part of the measures to fund social care reforms. The new dividends rates for individuals will be; 

8.75% (basic) 

33.75% (higher)  

39.35% (additional) 

The rate for trustees will be 39.35% on amounts in excess of the trust’s standard rate band. 

The dividend allowance available to individuals remains unchanged at £2,000. 

The personal allowance and basic rate band will be frozen at £12,570 and £37,700 respectively until 2025/26. This means that the higher rate tax threshold will remain at £50,270 for those entitled to a full personal allowance. 

National Insurance 

A 1.25% increase in National Insurance to help pay for social care reforms is to go ahead as planned from 2022/23.  This will apply to employees, employers and the self-employed. From 2023/24 it is intended that the 1.25% rise will become a separate standalone levy. 

The thresholds at which employees and the self-employed will start to pay National Insurance will be brought in line with the annual personal allowance of £12,570 from July 2022. 

From April the self-employed will not have to pay class 2 flat-rate National Insurance contributions if their profits are below £9,880, with the lower profits limit rising to £12,570 from July. 

Capital Gains Tax 

As previously announced, the annual exempt amount for capital gains tax is to remain frozen at £12,300 for individuals and personal representatives until 2025/26.  The exempt amount for trustees of settlements is to remain frozen at £6,150. 

Inheritance tax 

Both the nil-rate band and residence nil rate band are to remain fixed at £325,000 and £175,000 respectively until April 2026. 

Corporation tax 

Corporation Tax is still set to rise to 25% from April 2023 for most companies.  Small companies, with profits below £50,000, will continue to pay tax at the current rate of 19%. There will also be a reintroduction of tapering relief for businesses with profits under £250,000. 

Take Control Of Your Finances With Springfield Financial 

Here at Springfield Financial Services Ltd, we’re a highly qualified and passionate team of financial planners. We have the experience and tools required to provide the highest levels of unbiased, independent financial advice.  

Our services are available to both individuals and businesses, so if you’re interested and would like to make an enquiry please feel free to call our team on 01772 729 742.