Date24 Mar 2022
CategoryTax, Employer Solutions
A mixed reaction to the chancellor’s announcements.
Rishi Sunak addressed parliament yesterday with his 2022 Spring Statement. The backdrop to which is of course an uncertain world and UK economy with inflation in February at around 6.2% and expected to average at 7.4% this year.
Downward pressure on wages combined with high inflation created some optimism that we would see some significant help for employer and employee alike. However, the changes around employment taxes were limited and we were somewhat left to rue what might have been included but was not.
The Chancellor has stated the Employee National Insurance starting threshold will rise to £12,570 from July 2022 with no employee NI paid below that sum. This helps employees but there was no mention on the employer threshold.
However, the Employment Allowance for employers will rise by £1,000 to £5,000. The eligibility for Employment Allowance is where an employer’s NIC liability is less than £100K in the previous tax year.
This will be a helpful easement for small employers which goes some way to mitigate the fact that there is no change in the Employer National Insurance threshold and which the Chancellor estimated will benefit around half a million SMEs.
We welcome the planned discussions on reliefs such as training, qualifications and R&D tax credits, but for SMEs, these measures in combination as well as the temporary cut in fuel duty are unlikely to fully mitigate the inflationary impact of the Health and Social Care levy from April 2022. This means there will be more pressure on SMEs from their employees to increase wages to offset the effects of increased inflation - which is predicted to rise to 8% this year - in order to retain valued staff.
The tax cuts outlined for 2024 are welcome, but SME employees are struggling with steeply rising living costs now. We would urge the Chancellor to go further in his support for the SME community.
Faced with such increases and challenges, employers may want to think about the way in which they engage employees. Over the course of the last two years, we have seen an increase in so called “agile working” and employee home working. This is proving attractive to many employees who would like to combine their personal and business lives more effectively whilst employers may be able to reduce overhead costs. Some encouragement to accelerate this would have sent a positive message to employer and employee alike.
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