Income tax cut as Sunak looks to meet cost of living crisis

By Ged Henderson

23 Mar 2022

rishi-sunak.jpg

Rishi Sunak today announced the basic rate of income tax will fall to 19p in 2024 as he unveiled a raft of measures to support businesses and families in the face of growing economic pressure.

The chancellor told the Commons that the OBR expects inflation to rise further this year to hit the 7.4 per cent mark with the situation in Ukraine beginning to take its toll.

In his mini-Budget statement he revealed that for only the second time in 20 years fuel duty will be cut. The 5p a litre reduction will be in place for 12 months.

In another measure, he announced that the National Insurance threshold will also increase by £3,000. The chancellor described it as “a tax cut that rewards work.”

The new NI threshold will be £12,570. Mr Sunak said this would be £6bn “personal tax cut” for 30 million people.

However, he made no move to scrap the increase in National Insurance Contributions which will come into effect next month.

The chancellor did announce a new tax plan and in a move aimed at small businesses he said the Employment Allowance will increase to £5,000, describing it as a tax cut worth up to £1,000 for half a million SMEs. The new figure will come into place in two weeks’ time.

He said that the reduction in basic income tax was fully costed and fully paid for in the plans he was announcing.

The chancellor said his new tax plan would adopt a “principled approach to cutting taxes” and pledged to work with businesses over summer to explore options to help the private sector. He said: “We will reduce and reform taxes. We will build a stronger economy.

He pledged that the government would reform the generosity of tax credits on the money private businesses spend on research and development.

And he revealed that the government also planned to cut tax rates on business investment, with details to be set out at the autumn Budget.

Employment training will also be reviewed as part of the new tax plan. This will include assessing whether the apprenticeship levy which pays for skills training - is “doing enough”.

Shadow chancellor Rachel Reeves said the planned 1.25 per cent rise in National Insurance Contributions which will come into effect in April should have been scrapped today.

She also criticised the chancellor for not putting a windfall tax on oil and gas companies - which Labour has been calling for - which she said would provide real help to families”.

Reaction

Tony Medcalf, tax partner at MHA Moore and Smalley: "The one per cent cut to the basic rate of income tax promised by the end of the parliament by 2024 will steal the headlines – an unexpected rabbit out of the hat the chancellor left to the end of his statement. Another significant intervention was the increase in the National Insurance threshold by around £3,000 effective from July 2022, bringing it in line with the income tax personal allowance. This was a longer-term target for the chancellor but has been significantly accelerated and, while it stopped short of the postponement in the 1.25 per cent rise in National Insurance Contributions many had called for, it will help lower earners keep more of their income.

"The five per cent cut to fuel duty should provide some welcome relief for motorists and the removal of VAT on energy efficiency measures will save money for households looking to reduce energy costs. For businesses, an increase in the employment allowance to £5,000 will help some small business owners reduce employment costs from April onwards.

"Despite the tax cuts, Mr Sunak made clear during his statement that the public finances would likely get worse and that additional public borrowing would be limited. This means we may see measures further down the line to increase the tax take."

Matthew Johnson, associate partner WNJ: "Little of what the chancellor announced today will immediately ease the pain being felt by SMEs squeezed by rising prices. In many ways it has added to the uncertainty. The fact that he did not scrap the 1.25 per cent hike in National Insurance contributions (NIC) scheduled for April 1, was particularly disappointing for SMEs facing the challenges caused by rising inflation, soaring energy bills and the impact of war in Ukraine.

"The chancellor has pledged to work with businesses over summer to explore options to help the private sector.
We need to see what the reform of tax credits on the money private businesses spend on research and development will look like. Also, the plans to cut tax rates on business investment, with details again to be set out at the autumn Budget.

"Employment training will also be reviewed as part of the new tax plan. This will include assessing whether the apprenticeship levy which pays for skills training - is “doing enough”. Once again, we will have to wait and see what that will look like and if it will benefit SMEs. In many ways, today’s announcement has raised more questions than answers."

Jane Parry, managing partner at PM+M: "The CBI has been lobbying the chancellor to turn his “super deduction” – which offers tax savings on business investment – into a permanent deduction to encourage firms to spend. That would help to offset the planned rise in corporation tax from 19 per cent to 25 per cent which is set to change from April 2023, but only consultations were announced today ahead of the main Autumn Budget. Reforms to R&D tax credits are hopefully a step in the right direction but more detail will be needed to truly understand what value they will deliver. I fear we may see the demise of the currently very generous SME scheme in favour of an enhanced scope of the RDEC scheme, which may be improved over its current levels but is still likely to be less generous to SMEs. What business needs is clarity and incentives, fast.

"I did think the government tried to downplay the importance of the Spring Statement, citing the £21bn worth of measures – as well as the rise in the minimum wage from £8.91 to £9.50 an hour from April - that have already been announced to help with living costs this year and next. But energy and food prices are only going one way so time will tell if his approach costs him politically as the massive squeeze on UK households and businesses continues to intensify."

Stephen Church, EY’s North Markets Leader: "The mention of Levelling Up was notably absent – a disappointment compared to the treasury’s Autumn statement, and the government’s recent Levelling Up white paper. In order to truly level up and reduce regional inequalities, the focus must be on substantial, long-term and fair funding across the whole country. In turn, building a strong Northern economy that can deliver prosperity for all.

“The question now will be whether the UK economy allows the Chancellor to stick to his course, or whether crises will continue to beset his plans. Either way what could be seen as a missed opportunity for the Levelling Up agenda in today’s statement, will only increase pressure for the government to deliver on commitments come the Autumn Budget.”

Victoria Vyvyan, deputy president of the Country Land & Business Association: "The failure to keep VAT at 12.5 per cent for hospitality businesses will have a sizable impact on profitability at an already testing time for many. This is a blow for rural businesses that are being asked to diversify, and the reduction in business rates will not plug this gap. If the government is serious about supporting the countryside, it must create the environment for rural businesses to thrive.”

Suren Thiru, head of economics at the British Chambers of Commerce: "The Office for Budget Responsibility’s latest forecasts paint a bleak picture of the UK’s economic prospects over the near-term as the drag effect of rising inflation, supply chain disruption and higher taxes weakens key drivers of UK output.

“The robust forecast for business investment looks too optimistic with rising cost pressures, higher taxes and a deteriorating economic outlook likely to dampen investment intentions by more than the OBR’s latest projections suggest.

“The OBR has also confirmed that the UK’s fiscal outlook has improved since the Autumn Budget, despite a sharp uptick in debt interest payments. This leaves the chancellor with more than enough fiscal headroom to better support households and businesses through this difficult period.”

Enjoyed this? Read more from Ged Henderson

Latest news

1

McMurrays Haulage expands fleet after contract win Warehouse Supervisor at Pets Choice Brad Eddleston and McMurrays Sales Manager Rob Spencer. Photo credit: McMurrays Haulage Limited

McMurrays Haulage expands fleet after contract win

21 Oct 2025

2

Dragons' Den star to shine on Lancashire Business Day Derry Green

Dragons' Den star to shine on Lancashire Business Day

21 Oct 2025

3

Eden Project Garden at RHS Chelsea Flower Show 2026 marks 25th anniversary Eden Project garden

Eden Project Garden at RHS Chelsea Flower Show 2026 marks 25th anniversary

21 Oct 2025

4

Lancashire farm named 'Family Farming Business of the Year' British Farming Awards

Lancashire farm named 'Family Farming Business of the Year'

20 Oct 2025

5

Breck Homes appoints new managing director Phil Dolan, Breck

Breck Homes appoints new managing director

20 Oct 2025

Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

Help to grow management course
Help to grow - barriers to growth.png.png
LBV Hub Seminars
26 Sep 2025 - 16 Dec 2025

Help to grow management course

Preston Campus , Preston , PR1 2HE

09:00 - 15:00

Women scaling up Blackpool Fylde and Wyre
LBV Hub Seminars
22 Oct 2025 - 09 Jan 2026

Women scaling up Blackpool Fylde and Wyre

The Small Business Academy, Blackpool, FY4 5JX

09:30 - 15:30

HR Essentials for pubs, bars and licensed venues
EventBrite NORi - 22nd Oct Webinar.png.png
LBV Hub Webinar
22 Oct 2025 - 22 Oct 2025

HR Essentials for pubs, bars and licensed venues

Online - Teams, Leyland, PR253XH

13:30 - 15:00

RISE - Lancashire's unique leadership programme for women
thumbnail_Emma Weston Illustration WENDY BOWERS RISE Illustrstion.jpg.jpg
LBV Hub Seminars
22 Oct 2025 - 18 Mar 2026

RISE - Lancashire's unique leadership programme for women

East Lancashire Chamber of Commerce, Clayton le Moors, BB5 5JR

09:30 - 15:30

North West Business Expo 2025
https---cdn.evbuc.com-images-880456273-4862066883-1-original.20241022-105445.jpeg.jpg
LBV Hub Exhibitions
24 Oct 2025 - 24 Oct 2025

North West Business Expo 2025

Bolton Stadium Hotel, Bolton, BL6 6SF

09:00 - 15:00

Chamber Business Lunch – October
LBV Hub Networking
24 Oct 2025 - 24 Sep 2025

Chamber Business Lunch – October

Lancaster Golf Club, Lancaster, LA2 0AJ

11:00 - 13:30

Lancaster District Business Support Expo
Lancs-cham-logo.jpg.jpg
LBV Hub Networking
29 Oct 2025 - 29 Oct 2025

Lancaster District Business Support Expo

The Platform, Morecambe, LA4 4DB

10:00 - 15:00

Chamber Breakfast Networking – November
Lancs-cham-logo.jpg.jpg
LBV Hub Networking
06 Nov 2025 - 06 Nov 2025

Chamber Breakfast Networking – November

Porsche Centre South Lakes, Carnforth, LA6 1FW

08:30 - 10:30

Lancashire Police business update with The Police and Crime Commissioner
Lancs-cham-logo.jpg.jpg
LBV Hub Roundtables
10 Nov 2025 - 10 Nov 2025

Lancashire Police business update with The Police and Crime Commissioner

Lancaster Castle, Lancaster, LA1 1YN

14:00 - 16:00

AI, Creativity, and what it means to be human
2.jpg.jpg
LBV Hub Networking
11 Nov 2025 - 11 Nov 2025

AI, Creativity, and what it means to be human

Society1, Coworking Space, Preston, PR1 3LT

18:00 - 20:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV124 Online Graphic
Subscribe now

Weekly news bulletin