Spring Statement: What is it and how does it affect you?

May 4, 2022 • Chris Bardsley

Sky-rocketing energy and inflation rates have left millions struggling to pay for food, bills and household essentials. Chancellor Rishi Sunak released the Spring Statement 2022 just a few weeks ago – with numerous measures to combat the rising cost of living.

Here at Fair for You, we believe in making finance accessible to you. Whether it’s flexible loan repayment plans or breaking down current economic events, we’ve got your back.

Low-income households are likely to feel the full effects of the UK’s economic crisis. In today’s blog post, we break down the Spring Statement 2022 and the main economic changes in the UK – from your income tax to energy bills.

What is the Spring Statement?

The statement is made by the Chancellor of Exchequer, Rishi Sunak, to the House of Commons every year. The statement summarises the UK economy, the Office for Budget Responsibility (OBR) and any progress made since the Autumn Budget. The Spring Statement 2022 addressed the current economic crisis – including income tax personal allowance and fuel duty cuts.

A quick overview of the Spring Statement

Your taxes might go down

In the Autumn Budget, Sunak announced a 1.25% increase in health and social care levy for Class 1 and 4 National Insurance rates from the 6th of April. However, in the Spring Statement, the Chancellor revealed the threshold for National Insurance tax would rise in July. The higher threshold means around 70% of Brits will have reduced taxes, even when paying a 1.25% extra health and social care levy. The threshold for when people start paying National Insurance will increase to £12,570 in July as well. However, those earning between £34,000 and £35,000 are at a tipping point for the tax rise. They will still pay more tax due to the levy.

Fuel will be cheaper

UK petrol prices have increased by more than 40p per litre since the 2021 statement. The price of fuel increased due to the rising cost of crude oil – which is used to make petrol and diesel. The demand for fuel collapsed during the pandemic, but as restrictions eased, the demand for energy expanded. Suppliers struggled to meet the growing demand, causing prices to rise. Russia’s invasion of Ukraine has only exacerbated the situation.

However, after the latest Spring Statement – fuel duty has been cut by 5p per litre. This is only the second time fuel duty has been cut in two decades, and it’s reportedly the biggest reduction ever. It should save the average car driver over £100 in the next year and van drivers around £200.

Switch to green energy options

Energy costs have increased by a whopping 54% due to the current energy crisis in the UK. Between the Russian invasion of Ukraine and China’s sky-high demand for energy – UK suppliers were left scrambling for resources. To combat these prices, the Chancellor introduced 0% VAT for homeowners investing in energy-saving materials, like solar panels and heat pumps. Previously, it was 5% VAT.

The Office for Business Responsibility estimates that energy will rise by 40% in October 2022. Investing in green energy options could help reduce your carbon footprint and energy bills later down the line. Check out our blog on Energy Prices to find out more.

More household support available

The cost of living has increased dramatically in the last year. Vulnerable households are likely to feel the full effect of the UK’s economic downturn. Sunak has doubled the Household Support fund to £1 billion, and local authorities will receive extra funding to divide how they see fit.

Changes to National Insurance

Employers can now reduce their National Insurance payments. The employment allowance will increase from £4,000 to £5,000 this month.

The cost of living is rising

In February 2022, the inflation rate hit 6.2%, marking the fastest inflation rate in 30 years. However, the OBR expects inflation to punch 8.7% in the last three months of 2022 due to the fallout from Russia’s invasion of Ukraine.

Inflation is measured by the Office for National Statistics (ONS) – with the “basket of goods.” The basket is regularly updated with items like tinned beans, sportswear, plant-based options, etc. The ONS updates the inflation rate every month to show how prices have changed throughout the year.

Public sector net debt has fallen by more than half since the peak of the pandemic. However, the improvements to government borrowing are only partially offset by the increase in inflation.

The huge jump in inflation has left many households struggling to afford basic living expenses. Fair for You has flexible repayment plans for household appliances, like fridges and washing machines. Keep your household afloat and apply for a loan you can afford to repay.

Future changes

Income tax will stay at 20% on earnings between £12,570 and £50,270 for the 2022/23 tax year. Those earning over £50,270 will start to pay a higher tax rate. In the Spring Statement, the Chancellor said the basic rate for income tax will drop to 19% in April 2024. Plans to reform taxes around business investment will be outlined in the Budget later this year.

Find Out More

If you or anyone you know is struggling to afford the basic items they need to furnish their home or support their family, then Fair for You is here to help.

As mentioned, we look to offer essential goods to those on a low income, but in a way, that’s different to the companies that set out to do so for massive profit at your expense. Instead, Fair for You is on your side, and we strive to offer our stock at the lowest price possible in line with retail value with a flexible payment schedule. Our focus is on people, not profit.

Check out our online shop to view our products for sale, including beds, laptops, sofa, dining room furniture, children’s beds, hoovers and much more.

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