The Spring Statement was presented by Chancellor Rishi Sunak with a promise to provide “security for working families” and a new tax plan as he also warned the invasion of Ukraine "presents a risk to our recovery.”
The main headline announcement directly affecting property owners was the news that VAT will be removed on installing energy saving materials, such as heat pumps and solar panels.
Dominic Agace, Chief Executive of Winkworth, welcomed the move: "The Chancellor removing VAT on improvements to upgrade our housing stock and make them more energy efficient is a major boost for homeowners and also for landlords and provides some relief against recent measures increasing the costs and reducing the viability of their investments. As we face increased rental costs due to sell-offs by landlords struggling in the face of increased regulation and taxation, this removal of VAT is vital to ensure we have sufficient supply of rental properties for young professionals needing to move to our cities for work, with rental costs they can afford to pay. It will also help to reduce energy costs across the housing market, keeping us on track to achieve carbon neutral homes.”
Other key points:
- The Chancellor announced that fuel duty will be cut by 5p from 57.95p per litre following the surge in petrol prices with the reduction lasting for 12 months.
- He also raised the National Insurance threshold by £3,000 to cushion the blow of his planned tax hike in April. It will mean workers can earn £12,570 without paying the tax, a £6bn tax cut worth over £330 per year for employees. This means that anyone earning less than about £35,000 a year will pay less national insurance – about 70 per cent of all workers.
- A new tax plan was unveiled by the Chancellor that will aim to help families with living costs, and encourage higher growth.
- The household support fund was doubled to £1bn with local authorities delivering the extra £500m from April.
- The Chancellor has already announced a £9bn package to help families with their energy bills. Around 80pc of households will receive a £150 council tax rebate and will also get £200 off their energy bills in October. However, the latter will be paid back over time.
- He promised to cut the basic rate of income tax from 20p to 19p in the pound before the next election. He said the tax cut would cost £5bn and benefit 30m people.
- A pledge to cut taxes on business investment when the "Super Deduction" ends next year which allows companies to cut their tax bill by up to 25 per cent for every £1 they invest.
- Research and development tax credits will be reformed.
- The Employment Allowance will increase by £1,000 to £5,000, a saving for firms looking to hire workers.
Outlook
- The Office for Budget Responsibility has delivered a mixed set of forecasts for the Chancellor.
- Growth is set to slow to 3.8pc in 2022 and 1.8pc next year, sharply down from previous predictions of 6pc and 2.1pc, respectively.
- Inflation is expected to average 7.4pc this year, much higher than earlier forecasts. However, unemployment will be lower and has already fallen to 3.9pc.
- While government borrowing for 2021/22 was better than expected at £127bn compared to the watchdog's previous prediction of £183bn, it lifted its deficit forecast for next year. Borrowing is expected to fall to £99bn in 2022/23 but this is higher than the £83bn predicted at October’s Budget.