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Tax measures

Fuel Duty
Although this measure had been widely expected, the main ‘headliner’ was the cut in fuel duty. The announcement was for a temporary 12-month cut to duty on petrol and diesel of 5p per litre, representing a tax cut of around £2.4 billion over the next year. The RAC has said that this cut would reduce the cost of filling up a typical 55-litre family petrol car by around £3 but, although welcome, ‘will only take prices back to where they were just over a week ago’.

National Insurance Contributions
Despite calls by many back benchers to scrap the NIC/NHS levy due to come in next month, the Chancellor decided instead to increase the NIC Primary Threshold and Lower Profits Limit from £9,880 to £12,570 to align with the single personal allowance. This measure will come in for the July payroll run but with the planned 1.25 percentage point increase in NIC for health and social care still going ahead in April, the Chancellor will be receiving two months of increased NIC receipts. The delay is to give payroll software providers the time to accommodate the change into their systems.

The realignment of the NIC and the tax starting point is a long overdue measure but note that the personal allowance has remained the same for two years now and is intended to be so for another three years which will result in more tax receipts as wages increase.

The self employed have not been left out, however, because as from April 2022, the Lower Profit Limit has been increased to align with the personal allowance. Therefore self-employed individuals with profits between the Small Profits Threshold (£6,725) and the (increased) Lower Profit Limit (£12,570) will no longer pay Class 2 NIC. Although no Class 2 NIC payments will actually be paid, the year will still count towards state benefits such as the state pension. For the year 2022/23 the Lower Profit Limit will be £11,908 comprised of the pre-July weekly Primary Threshold of £190 and the new, post-July threshold of £242.

Employment Allowance
The Employer’s NIC Secondary Threshold will remain at the same level although the Employment Allowance will increase to £5,000 from £4,000 from April 2022. The Chancellor confirmed that this would benefit ‘around half a million businesses with a tax cut worth up to £1,000 each’. However, the measure will not benefit the many SME company directors who withdraw a small salary with the balance as dividends as the Employers Allowance is not available to companies where only one employee is paid above the Secondary Threshold and that employee is the director of the company.

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