On 23rd March, Rishi Sunak delivered his mini-budget, unveiling the government’s highly anticipated plans to combat the current cost of living crisis. In this article, we’ll be looking at some of the key points from his statement and how this could affect you.
Chancellor Rishi Sunak opened his statement by addressing the current war in Ukraine, claiming the UK would be responding to the conflict by building a stronger and more secure economy. He said:
“The actions we have taken to sanction Putin’s regime are not cost-free for us at home. The invasion of Ukraine presents a risk to our recovery as it does to countries around the world.”
He then went on to talk about the economical growth for the future.
Growth
The Chancellor said the Office for Budget Responsibility forecasts a 3.8% growth in the economy this year.
Gross domestic product (GDP) is expected to grow by 1.8% next year, 2.1% in 2024, 1.8% in 2025 and 1.7% in 2026.
The economy grew by 7.5% in 2021, after a 9.4% decline in 2020 during the first wave of the coronavirus pandemic- the biggest fall in a century.
National Insurance Threshold Rise
From July, the National Insurance (NI) threshold at which workers start to make Class 1 and Class 4 contributions will increase to £12,570, matching the income tax personal allowance.
This means that an estimated 70% of all workers will have their taxes cut, despite having to pay the extra 1.25% health and social care levy that was announced in the Autumn budget and starts next week on 6th April.
However, for those earning an annual income between £34,000 and £35,000, you will still be paying more tax due to the levy.
VAT Cut for Efficient Homeowners
Homeowners that invest in energy saving materials such as insulation, heat pumps or solar panels for the next five years won’t have to pay any VAT, compared to the usual VAT charge of 5% on home energy, helping to keep energy bills down.
Fuel Duty Cut
In an attempt to help with rising petrol prices, fuel duty will now be cut by 5p per litre, effective from 25th March until March next year. This is just the second time fuel duty has been cut in the last 20 years and, according to the Chancellor, will save the average car driver around £100 and vans drivers around £200 over the year.
Household Support Fund Doubled
To help the most vulnerable households, Rishi Sunak announced that the Household Support Fund is being doubled to £1bn from £500,000.
Local authorities will receive the additional funding from today and can choose how they divide it among those who are most in need.
The fund was introduced in November of last year and was set to end on 31st March, however, the government is extending and doubling it in order to combat the cost of living crisis.
Inflation Will Average 7.4%
The Office for Budget Responsibility (OBR) has predicted that inflation will average 7.4% this year, up 1.2% from February’s 6.2% figure. These high prices are expected to quickly outpace savings, interest growth and wage rises, meaning the majority, both businesses and individuals are likely to feel the pinch.
The Bank of England voted to increase the base rate of interest again from 0.5% to 0.75% last month in response to this soaring inflation. This is the second back-to-back rise in just 4 months.
Support for Your Business During the Cost of Living Crisis
To find out how Ryans can help your business in the current cost of living crisis, please don’t hesitate to reach out to our team. For more of the latest financial news and updates, check out our handy blog.