Prudence is wise for households in these times as most households will feel like their domestic budgets are impacted badly which markets feel is likely to spill over into reduced corporate profits due to increased costs and corporate activity.

Staying the investment course

It is always impossible to forecast the future which is why “time in” – holding investments targeting an inflation offset over the long term should be the focus of investors.

Holding surplus cash is certainly an erosion of capital in the most transparent way currently – with a reduction in ‘buying power’.

Cost of living pressures – Chancellor Rishi Sunak’s recognised the pressures placed on society, created by supply chain issues, created firstly by Covid 19 and currently by the invasion of Ukraine and the sanctions applied to Russia and the reorganisation of the supply of products coming from Russia but also by the ‘thinking’ that the value of cheap goods from Regions that create worry to a way of life in a democratic western world may not offer long term benefits!

A summary of Chancellor Rishi Sunak’s Spring Statement – Budget

National Insurance

Chancellor Rishi Sunak announced that National Insurance (the Primary Threshold – the point at which individuals will start to pay NI) will increase in April 2022 from £9,568 to £9,880 and will then rise again on 6 July 2022 to £12,570, aligning it with the income tax personal allowance.  This effectively brings forward the Conservative manifesto to increase the NI threshold.  The following table, provided by Quilter, shows the impact of the NI change:

Anybody earning around £34,000 and below will be paying less National Insurance than in the current tax year, i.e. 2021/22. This change will benefit those on lower incomes but it is felt it will have a more positive effect for middle-income households. “The Resolution Foundation estimate that the bottom half of income households would on average gain £250 a year”.
(Quilter Spring Statement 2022 – 23 March 2022)

There will also be a benefit for the self-employed with a similar increase in the lower profits limit to £12,570. However, as self-employed NICs are assessed on an annual basis, the annualised lower profits limit which will apply from the beginning of the next tax year, i.e. 2022/23 will be £11,908. This equates to 13 weeks of the threshold at £9,880 and 39 weeks at £12,570, which mirrors the position for employees who are employed and paid on a weekly or monthly basis.

In addition, the self-employed with lower profits between the small profits threshold and lower profits limit will continue to build up National insurance credits but will not pay any class 2 NICs.

Basic rate income tax 

With effect from April 2024 the basic rate of income tax will be reduced from 20% to 19%, this is the first cut to basic rate tax relief in 16 years.

Fuel duty 

It was confirmed that a cut in fuel duty will be effective from 6pm on 23 March, for the next 12 months, at a rate of 5p per litre for petrol and diesel.  It is estimated that the average consumer could save £2 to fill up their tanks.

VAT relief on solar panels and heat pumps… 

There will be VAT relief for the next 5 years on the household installation of energy saving materials on things like solar panels, heat pumps and insulation taking effect from April 2022.

Following the measures announced by the Chancellor Rishi Sunak’s, I am appending below a summary of what we were already aware of:

National Insurance and Dividend Rate increase 

With effect from 6 April rates will increase by 1.25%

Freezing of tax bands 

Tax bands and allowances will be frozen until 2026 which includes Personal Allowance, Capital Gains Tax annual exemption, IHT nil rate bands, Pension Lifetime Allowances and ISA Allowances (this also includes JISA).

Corporation Tax

The corporate tax rate will increase from April 2023 to 25% on profits over £250,000.  For profits under £50,000 the rate will be 19%, with relief for businesses who have profits under £250,000 so they pay less than the main rate of 25%.

Cost of living Assistance

There is to be a council tax rebate of £150 for Bands A-D and an energy discount of £200 from the autumn.

I am appending below a Tax Table provided by Quilter for your information:

Tax Breaks

Don’t forget, the end of the tax year 2021/22 is upon us.  Use your allowances or you lose them:

• ISA Allowances
• Pension Allowances

Plan for Capital Gains Tax

Use Tax Relief products, such as VCT and EIS products where appropriate.  We can help you plan effectively.

As always, we recommend professional advice is gathered in order to understand the complexity of building a solid financial plan, including the construction of a balanced investment portfolio, minimising taxes and protection one’s family and business interests.

We at Best Price Financial Services are well placed to provide expert advice consultancy and product access.  Contact us if you require advice.

We hope this note is of benefit and assists you with your financial thinking.

Richard and the Best PriceFS Team