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25 Mar 2022

Spring Statement 2022: what it means for your money

Find out how the Chancellor's announcements will affect you

Chancellor Rishi Sunak delivered the Spring Statement today, making announcements about National Insurance thresholds, fuel duty and VAT relief. But what does this all mean for you?

Set against the backdrop of steep price rises, and with inflation surging, the Chancellor has already faced questions on how the government will help those struggling with mounting costs.

He addressed this, saying 'tough long-term decisions' were necessary in order to strengthen the UK economy.

To help you work out how the Spring Statement will affect your wallet, here's a rundown of some of the biggest changes.

National Insurance threshold rise

From July, the threshold at which workers will start making Class 1 and Class 4 National Insurance contributions (NICs) will increase to £12,570 - which matches the income tax personal allowance.

In the Autumn Budget, Sunak announced a new 1.25% health and social care levy to be added to Class 1 and 4 National Insurance rates.

Despite sustained calls to delay the tax hike, the Chancellor today confirmed that it would still be implemented from 6 April.

According to the Chancellor, the high NICs threshold will mean around 70% of all workers will have their taxes cut, even after paying the extra 1.25% health and social care levy.

However, we've found that the tipping point will come to those earning between £34,000 and £35,000; from this point, you'll still be paying more tax due to the levy.

To see how much National Insurance you'll pay, try our calculator below. To find out your total bill for 2022-23 you will need to check what you will pay between 6 April and 5 July, and then again between 6 July and 5 April, and add the two figures together.

Fuel duty cut

To help with rising petrol prices, fuel duty will be cut by 5p per litre, taking effect from 6pm tonight until March 2023.

This is only the second time the duty has been cut in 20 years, and the Chancellor says it's the biggest ever cut for all fuel duty rates.

He says, on average, the cut will save the average car driver £100 over the next year, while van drivers could save around £200.

VAT cut for energy saving measures

There'll be 0% VAT to pay for homeowners investing in energy saving materials such as solar panels, heat pumps or insulation for the next five years.

Up to this point, VAT had been charged at 5%.

Household Support Fund doubled

For the most vulnerable households, Sunak announced the Household Support Fund is being doubled to £1bn.

This fund was first introduced in November 2021, and its support was initially due to end on 31 March 2022.

Local authorities will receive the extra funding from April, and can choose how to divide it among those most in need in their local areas.

You can find more information about the support available in your area on your local authorities website.

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Inflation to average 7.4%

The Office for Budget Responsibility (OBR) predicts inflation will average 7.4% for this year, rising far higher than today's 6.2% figure for February.

Such steep price rises will outpace savings interest growth and wage rises, meaning we will feel the pinch.

Future changes to look out for

Sunak outlined changes he's planning to introduce in future tax years - some of which will have a direct impact on your pocket.

Income tax rate cut

In 2024, basic-rate income tax is due to be cut to 19%, down from the current rate of 20%. It's estimated that more than 30m people will benefit from a tax cut of around £175, and it will be the first time the basic rate of income tax has been cut for 16 years.

Reformed business investment taxes

To address the lack of capital investment in UK businesses, the government is looking for ways to reform taxes around business investment. Plans will be confirmed at the Budget later this year.

Simpler tax reliefs and allowances

The Autumn Budget could herald some big tax changes, as the government's Tax Plan document says it's seeking to simplify the tax system - which could mean an overhaul of the 1,000 existing tax reliefs and allowances.

This story has been updated since it was first published, adding in our Spring Statement podcast episode, and updated National Insurance calculator tool.