The Chancellor has stopped short of cutting headline rates of tax for now, despite calls to protect low and medium income households from the rising cost of living. However, he has promised a 1p cut in the rate of Income Tax in 2024 as part of a new long-term Tax Plan.
Richard Godmon, tax partner at accountancy firm, Menzies LLP, said, “Businesses will like the idea of a new Tax Plan, providing a long-term view of the fiscal landscape. This could help them to plan to make investments and reduce transactional pressures on their business activities. However, there isn’t much detail on what the plan will look like, just some promises to extend R&D tax relief and cut Income Tax, so we will have to wait and see.
“With inflation heading for double digits, doing nothing now was simply not an option for the Chancellor politically. The decision to raise the threshold for National Insurance Contributions by £3,000 to £12,570 is a positive step, which means that the planned 1.25% increase, (due to take effect from the start of next month) will have a reduced impact on low earners.
“Cutting fuel duty by five pence is a significant step that will help businesses and households that have been struggling to meet the cost of rising petrol and diesel prices. The recent dip in the wholesale prices means that further market-driven reductions in fuel costs are also in the pipeline.”
To support small businesses in the retail, hospitality and leisure sectors, the Chancellor announced that the new Business Rates Discount, which is due to take effect next month, will be extended, allowing businesses to claim up to a maximum of £110,000.
“Many SME businesses in these industries are still struggling to get their businesses back on track, following the devastating impact of pandemic-related restrictions and changes in consumer habits. The Chancellor has recognised this and singled them out for additional support with additional rates relief.”
Godmon added, “Many people were disappointed with the £9 billion package of support announced by the Chancellor in February to help soften the impact of domestic energy price increases. This Statement doesn’t offer much more – the new £500 million funding for household support funds to be delivered by local authorities, won’t go far.”
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