The Spring Statement is essentially a mini-Budget, allowing the Chancellor of the Exchequer to make announcements, some minor changes, and to provides updates on the economy. It does not usually include major tax or spending changes.
This is not an easy time for the UK with an economic backdrop of rising energy, fuel and food costs.
This article is a brief overview of some of the main points with particular reference to any changes that have relevance to those living outside of the UK and especially in the GCC. The UK press will cover many points in detail but many of the points will not be directly relevant to expats so this article focuses on the points that will be most relevant to us.
This is a limited statement so very little of relevance for non-residents but I will summarise briefly.
The Office for Budget responsibility (OBR) has stated that there is an “unusually high uncertainty around outlook” which is no surprise.
The main issues domestically include the rising cost of living with inflation reaching 6.2% in February. Add in disruption to global supply chains and the OBR expects inflation to rise to an average of 7.4% this year.
That is a real worry to many people, especially lower earners.
Several measures were announced
Motorists. Fuel duty to be cut by 5p per litre for 12 months from 6pm today. Largest ever cut on one go but prices are still high, especially following the recent increases so this is a minor measure in real terms.
This table shows how UK fuel prices are composed.
Click on image to enlarge.
Equalisation of personal tax thresholds. The threshold for National Insurance contributions will rise by £3,000 to £12,500 the same as the Personal Allowance for income tax. This is an annual saving of around £330 a year but will be swallowed up by the rise utility bills.
Calculations from the Institute Fiscal Studies show that people earning under £35,000 will see no increase in National Insurance payments but those earning more will see a net rise.
National Insurance is not paid by people over the UK state retirement age so will not benefit pensioners.
Income tax. A 1% cut in the basic rate announced to take place from 2024. This will make no difference now when bills are rising. The cynical might suggest that’s when we can expect the next General Election.
A cut in VAT from 5% to 0% for energy efficiency improvement. The relief is complex and the claim that this is due to leaving the EU is not true. Over the next five years, this will affect people who install solar panels, heat pumps and insulation but these are expensive measure and out of the reach of many, if not most people.
An appealing measure but very much targeted at the wealthy and higher earners. It also excludes Northern Ireland initially due to the Norther Ireland Protocol.
- The increase in National Insurance payment remains. The increase of 1.25% equates to a real increase of 10%.
- No windfall tax.
- Tax cutting options on business innovations. To be announced in detail in the Autumn Budget
- Some cuts for small businesses but not significant.
- A cut in tax rates for businesses in the hospitality, leisure and retail sectors by 50% next month.
- UK government debt expected to fall, as is government borrowing.
- No VAT cuts, a tax that affects lower earners disproportionately
With a real increase in energy bills, this will do next to nothing for most people in the UK, certainly not for average and lower earners. This is a quote from the OBR document.
This will disproportionately affect lower income households and overall, this Spring Statement is not a real benefit to the majority of people in the UK. While I applaud the equalisation of the pesonal tax thresholds, this seems like a bit of wasted opportunity when more assistance could have been given for those in need at this time.
Let’s hope we see more in the full Autumn Budget as it was stated that other measures are under discussion.
I write articles such as this one as part of the personal financial planning service and that I provide to expats, and the general consumer, financial and legal information that I provide in The National newspaper, and on the Facebook group British Expats Dubai.
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