Chancellor Rishi Sunak has delivered his mini-Budget to give people a helping hand with their finances as inflation hits a 30-year high.
This year’s statement comes at a time of uncertainty, following the attack on the Ukraine by Russia. The sanctions and other responses are vital in supporting the Ukraine, but they will have an adverse effect on the economy.
Higher than expected global energy and goods prices have led to an increase in the cost of living. Putin’s invasion will add to these pressures, increase inflation and leaves us all uncertain about the future.
The government’s COVID-19 vaccine rollout and Plan for Jobs have been successful in helping support a quicker than expected recovery and strong labour market. The total number of payrolled employees is now over 600,000 above pre-pandemic levels, and tax receipts have been stronger than expected. This has contributed to borrowing falling which has created additional headroom for manoeuvre.
Looking ahead, the mini-Budget delivered some much-needed support to people and businesses as we grapple with the challenges of inflation and an uncertain global economy.
Fuel Duty Cut by 5p/Litre
A 12 month cut will be introduced to duty on petrol and diesel of 5p per litre, representing a saving worth around £100 for the average car driver, £200 for the average van driver, and £1500 for the average haulier.
National Insurance Threshold Raised
A £3,000 increase to the National Insurance Primary Threshold and Lower Profits Limit. This is good news for the majority of people in the UK, as it will reduce their National Insurance contributions (NICs) and leave them with more money in their pockets.
Household Support Doubled
The household support fund will be doubled, raising support for poorer families to £1 billion.
Basic Income Tax Rate Reduced to 19% in 2024
The basic rate of income tax will be cut from 20 pence in the pound to 19 but not until 2024 when inflation is expected to be back under control with debt falling and the economy growing.
VAT Relief on Energy Saving Materials and Installation
Households will pay 0% VAT for energy saving materials and installation.
Support for SMEs
Business rates relief worth £7 billion over the next five years.
The Annual Investment Allowance is increased from £200,000 to £1 million until March 2023 to subsidise the cost of the Help to Grow management scheme, high quality training and help with adopting new digital technologies.
The rise in National Insurance rates will go ahead.
There was no help for public transport users who already have increased ticket prices to pay.
Benefits claimants will receive 3.1% more while facing cost of living increases of about 10%.
Low earning pension savers will only get 19% tax relief instead of 20%.
The Office for Budget Responsibility has predicted that inflation would rise to a predicted 40-year high this year and it will trigger “the biggest fall in living standards in any single financial year since ONS records began in 1956-7”.