Spring Statement: Tax cuts welcomed but further action needed to tackle countryside cost of living crisis
23rd March 2022
Rishi Sunak’s Spring Statement saw cuts to fuel duty, a raising of the National Insurance threshold and reduction in basic rate Income Tax.
Financial advisers at rural insurer NFU Mutual welcomed tax cuts in Rishi Sunak’s Spring Statement today (23rd March) but said the Chancellor could have done more to help with the cost of living crisis in the countryside.
Inflation is expected to average 7.4% this year and farmers are already struggling with even higher price rises in fuel, energy, fertiliser and other materials they need to keep their businesses running.
Commenting on cuts to fuel duty, NFU Mutual chartered financial planner Sean McCann, said: “The Chancellor had to do something to reduce the impact of soaring fuel prices and cutting fuel duty was always on the cards but the reality is a 5p cut is unlikely to make a material difference with prices so high.
“Fuel duty has been cut from 57.95p per litre to 52.95p per litre for 12 months, with VAT charged at 20% on top, so petrol and white diesel are still double taxed and highly so.”
The spiralling cost of petrol and diesel is having a significant impact on farmers and others in the countryside.
The government has said a proportionate cut will also apply to duty on red diesel ‘where practical’, which is expected to reduce it by just under a penny per litre. The price of red diesel is around twice what it was this time last year, hitting food production at a critical time for farming.
The National Insurance threshold for employees and the self-employed was raised by nearly £3,000. Mr McCann said this goes some way to mitigating the impact of the 1.25 percentage point rise coming in April, but it’s disappointing that the Chancellor did not go further.
“All workers will benefit from this threshold increase, which will cost the government £25.9bn over the next five years, but it will make a real difference to many low earners.
“However, it’s disappointing the Chancellor didn’t go further and delay the hike in National Insurance, which will still hit employees and farm businesses hard at a time when costs for fuel, energy, and fertiliser are all spiralling.”
The threshold at which employers begin paying national insurance remains frozen with increased employers’ national insurance contributions due to take effect from April.
“Employees and employers can reduce the impact of the 1.25% increase by making a pension contribution though a salary sacrifice arrangement,” he added.
Basic rate Income Tax reduced
The Chancellor announced that he would cut the basic rate of Income Tax from 20% to 19% in 2024. Mr McCann said this is a “welcome move that will impact millions of people”.
However, freezing Personal Allowance and income tax bands until 2026 will reduce the benefit for many working families, he noted.