In Focus: Tax Year End  

Tax tricks pulled out of the chancellor's hat

Tax tricks pulled out of the chancellor's hat
Photo: Fotoware/FTAdviser

Chancellor Rishi Sunak pulled few tax tricks out of his hat this Spring Statement, overshadowed as it was by Russia's ongoing war against Ukraine, but the main announcement was left for the last moment as he unveiled a 1p cut in the basic income tax rate. 

As the news broke of inflation hitting a 30-year high, at 6.2 per cent, Tim Morris, IFA with Russell & Co, took to Twitter to ask: "Can Rishi pull a rabbit out his hat to address the cost-of-living crisis? 

"A pay rise for pensioners with an additional increase to the state pension? Raising the national insurance threshold to cushion the extra 1.25 percentage points? A 'polluter pays' windfall tax on oil companies?" Rhetorical questions, he immediately pointed out.

One element of surprise - if it was a surprise to some people who had been commenting ahead of the event - was the announcement that Sunak will, from 2024, cut the basic rate of income tax from 20 to 19p in the pound. 

This is the first cut in 16 years. "The biggest tax cut to Britons in over a quarter of a century", he told the crowing chamber.

Elsewhere in his speech, Sunak gave little that had not already been leaked or revealed already. He confirmed the 5p per litre cut in fuel duty for 12 months, which Asset Intelligence said: "Is much less generous than comparable cuts seen in France and Ireland", as well as looking at ways to boost research and development. 

But there were few sops thrown to those wanting more tax help for families struggling with the rising cost of living. The 1.25 percentage point hike this April will remain.

Sunak commented: "My overarching ambition is to reduce taxes by the end of this parliament and we will do in the fairest way possible", as he unveiled his Tax Plan, stating that the 1.25 per cent health and care levy would "stay".

"This plan will build a stronger economy by reforming taxes in three ways: helping families with the cost of living, creating a culture of enterprise, and sharing the proceeds of growth fairly."

As part of that plan, the National Insurance threshold will rise by the full £3,000 pounds - the proposed £12,500 already touted in the 2020 Budget.

The perennial wish for inheritance tax thresholds to rise will continue to be a wish, with no IHT changes announced.

But with total HMRC receipts for April 2021 to February 2022 reaching £659.3bn - £132.1bn higher than the same period a year earlier - it might not be surprising that the UK government will take all the tax receipts it can get.

Generally, apart from the 1p cut in the basic income tax rate, and bringing forward the hike in the NI threshold, there was little tax tinkering announced this March, leaving commentators wondering what wizardry will be put into action in the Autumn Budget later this year. 

Already in effect

Meanwhile, tax changes announced in previous Budgets/Spring Statements have already started taking effect.