A cost of living crisis. A war in Europe. A world seeing COVID infection levels increasing. At this moment in time there is unusually high uncertainty around the future.
So, what’s the highlights of Rishi’s announcements today? In brief:
- A 5p cut to fuel tax
- Tax breaks for greener homes
- NI threshold of £12,750 for employees
- The employment allowance rise to £5,000
- 50% slash in business rates for Hospitality businesses
The narrative around industry and economy was a focal point of this speech. Rishi said “Flexibility to support businesses through crisis’s as they emerge AND the freedom to be dynamic in free economies which is the source of our strength.”.
With both businesses and people feeling the pinch of rapid forecourt fuel increases it would have been surprising had the chancellor NOT cut the pence per litre. So now you can readjust your cash flow forecast to reflect this reduction.
The war in Ukraine and the sanctions imposed on Russia will be felt in the UK’s economy. With the highest growth rate in the G7 forecast 2 years after the country went into lockdown this has been adjusted by the OBR to 3.8% for 2022.
With continual distribution to supply chains and increases in energy costs the Chancellor explained that the country could expect to see a 7.4% inflation rate over the coming months.
How will these changes affect my business?
The government have taken into consideration the broader macroeconomic environment whilst still maintaining their commitment to tax reforms. There’s lots of immediate reform that will come into play over the next 8 weeks including a cut in the business rates for hospitality amounting to 50% which will help for the mid to larger pubs, restaurants and venues and the rates they pay.
These tax reforms have been devised to create conditions for higher growth and then share the proceeds of growth fairly as well as helping families with the cost of living increases.
Tax cuts for working people have continued to be a commitment from Mr Sunak; he’s raising the NI threshold to £12,750 gifting the public an extra £330 a year of tax savings. This will help employees and directors of businesses for their allowance.
Some of the observations made are for the Autumn budget and include:
- Capital investment
- R&D tax credits
- Training for employees
People in the UK are lacking vocational qualifications with UK employers only spending a third of global average on training their employees, so the government want to hear how to incentivise employers to spend more on training.
Capital investment is considerably lower than OECD average which contributes to our productivity gap when compared to Germany and France. Rishi is proposing to cut tax rate for businesses when making investment in Autumn budget.
The Chancellor highlighted that he wanted to ‘Deliver for British Business’. Strengthening our economy here at home using that word ‘security’ in many senses the chancellor said ‘security also means supporting our fast growing economy and ensuring the resilience of public finances to help with the cost of living.’
You can read the full statement here https://www.gov.uk/government/news/chancellor-announces-tax-cuts-to-support-families-with-cost-of-living
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