Chancellor Rishi Sunak has announced his Spring Statement at a time when hard-pressed Brits are struggling with sharp increases in the cost of living. We look at what this mini-Budget means for your money.
Cut to the basic rate of income tax
The biggest announcement is a cut to the basic rate of income tax from 20 pence in the pound to 19 pence before the end of the current Parliament in 2024. This is the first cut to income tax in 16 years. Sunak hailed it as a “tax cut for workers, for pensioners, for savers, a £5 billion tax cut for 30 million people”.
Retail, hospitality and leisure sectors will receive a 50 per cent discount in business rates up to £110,000.
An increase to National Insurance thresholds
Another significant move is the raising of National Insurance Contribution (NIC) thresholds by £3,000. The Government had planned to increase it by £300 this year but Sunak said he is going much further, with an increase that will deliver “our promise to fully equalise the NICs and income tax thresholds”.
It means that from July, people will not pay any income tax or National Insurance on the first £12,570 they earn. “It’s a tax cut for 30 million people worth over £330 a year,” Sunak said.
Temporary cut to fuel duty of 5p per litre
The Chancellor also announced a cut to fuel duty of five pence per litre for 12 months, describing it as the “biggest cut to all fuel duty rates – ever”. The cut will be in place for 12 months to March next year.
Inflation to average ‘7.4 per cent this year’
Sunak said The Office for Budget Responsibility has forecast that inflation will average a record 7.4 per cent this year.
Heat efficiency savings
There is a scrap to VAT on energy efficiency measures such as solar panels, heat pumps and insulation in a bid to help homeowners install more energy saving materials (this will not apply to Northern Ireland). The Chancellor said a typical family installing solar panels could save £1,000 on installation and up to £300 a year on energy bills. The cut will last for the next five years.
Household Support Fund doubled
Sunak also pledged to double the Household Support Fund – which is to local councils to support the most vulnerable people – to £1 billion. This funding will be available in April.
Help with energy bills
Sunak has already unveiled plans to help with rising energy bills, with a £200 loan to every household to cut their gas and electricity payments from October – although not until the price cap jumps by 54 per cent.
Households will have to pay back the £200 energy bill rebate over four instalments from next year when energy prices should supposedly fall.
Households in England that are in council tax bands A-D will also receive a £150 rebate to help with energy bills. Despite calls from consumer charities to increase this help, Sunak did not go any further with it in the mini-Budget.