With inflation rising and households facing the largest ever recorded cost-of-living squeeze, Chancellor Rishi Sunak recently delivered the government’s Spring Statement. This blog summarises some of the key points that you should be aware of.
The treasury predicts that inflation is likely to average 7.4% for the rest of the year, a rise from the current level of 6.2%. This will put further significant pressure on household budgets as the cost of living continues to increase. Local Authorities are to be given a further £500m of funding for the Household Support Fund, which is designed to help the most vulnerable households – including pensioners and families with children – deal with the rising cost of living.
The Chancellor noted that the economy is forecast to grow by 3.8% this year, with further growth of 1.8% in 2023, and 2.1% in 2024. This comes after record growth of 7.5% across 2021, despite a sharp contraction in December when the Omicron variant had an impact on consumer spending. Clearly the pandemic has been the main dictator of the economy for most countries since 2020, although Brexit has also had a part to play. It is now the war in Ukraine which poses a major global economic threat, which we have already seen affecting oil prices in recent months; the chancellor’s announcement of a 5p per litre cut in fuel duty making little difference in the wake of massive price rises. In a time of much turbulence, it therefore remains to be seen how accurate these economic forecasts will prove.
Some significant changes have been made to National Insurance. There will be a 1.25% percentage point increase in National Insurance Contributions, however the income level at which individuals start making contributions will rise significantly in July to £12,570 (from £9,880). In addition, the Employment Allowance, which gives relief against smaller businesses’ employer NICs will increase to £5000 from April.
All the information from the Spring Statement can be found in the chancellor’s speech which you can find here. For help and support understanding the changes please contact your accountant.
