In Focus: Tax Year End  

Chancellor's tax reliefs 'not enough' to tackle crisis, IFAs warn

Chancellor's tax reliefs 'not enough' to tackle crisis, IFAs warn
 

Advisers have responded to the chancellor’s spring statement with mixed reviews, with most welcoming the national insurance threshold increase and income tax drop, but many warning it will not go far enough to tackle the ongoing cost of living crisis.

In the statement today, Rishi Sunak announced the national insurance threshold will be lifted from £9,880 to £12,570 in July to equalise it with income tax.

Additionally, the basic rate of income tax will be cut from 20 pence to 19 pence in the pound by 2024.

He also announced the scrapping of the 5 per cent VAT on green home improvements such as heat pumps and solar panels.

Angela Marson, chartered financial planner at Fairstone, said the news was “bittersweet”.

“[The announcement represents] an increase of £3,000 before employee NI is payable, however the payable rate is still increasing as planned from 12 per cent to 13.25 per cent - many low and mid-level earners will feel the most benefit.”

She said the proposed reduction in the income tax rate will put more money in the hands of working people but will also have an impact on pension contributions that attract tax relief.

“If tax is being paid at 19 per cent then it follows that tax relief on such contributions will attract a lower rate too.”

Imran Hussain, director at Harmony Financial Services went further, saying the statement was “underwhelming”.

“It was like throwing a bottle of water onto a burning building and hoping that it will put the fire out,” he said.

“Right now, inflation is spiralling out of control, and nothing material has been announced to bring utility costs under control which will be the biggest burden on the majority of working families and should have been a priority for the government."

Pressure had been piling on Sunak to provide assistance for households struggling under the weight of rising inflation, soaring energy prices and the upcoming introduction of the heath and social care levy. 

It was announced today (March 23) that the consumer prices index rose 6.2 per cent in the 12 months to February this year, an increase from the 5.5 per cent jump in January, according to the Office for National Statistics.

Lewis Shaw, founder at Shaw Financial Services, said the statement has consigned vast swathes of the British public into a downward spiral into poverty. 

“A reduction in the cost of making homes energy-efficient is excellent, but there's one problem, most people don't have the money to spend on making their homes energy-efficient.”

 If you're already struggling to get by, being told to insulate your home and pay for some solar panels is probably not at the top of your priority list, he added. 

“Sadly, everything announced today goes no way to fix what we have coming over the horizon."

But for Ben Yearsley, director at Fairview Investing, said the statement was a “decent giveaway”.