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What we learnt from the Spring Statement
Chancellor Rishi Sunak delivered his Spring Statement on 23 March 2022. Despite lobbying to delay the upcoming 1.25% increase in National Insurance Contributions (NICs) payable by employees, employers and the self-employed, the government will still go ahead with the planned increase, the reason being to provide additional funds for health and social care.
Some new and amended measures were announced, including the annual level at which employees and the self-employed start to pay NICs. These were due to increase from £9,568 to £9,880 from 6 April 2022 and the increase will still go ahead but it will be further uplifted to £12,570 from 6 July 2022, which will effectively align the point at which an individual starts to pay NICs with the £12,570 income tax personal allowance.
During the statement, The Chancellor committed to reduce the basic rate of income tax from 20% to 19% but not until 6 April 2024. It is estimated that this will save 30 million people an average of £175 per year. Fuel duty has been cut by 5p per litre for 12 months, this came into effect at 6pm on 23 March 2022.
What to do with your savings?
Saving used to be the foundation of good financial management. Putting cash away to deal with emergencies, or to build up a cash sum for anything from a deposit on a first home to providing financial security for our later lives.
Banks and building societies were only too pleased to help us become savers. They needed our cash to lend out to other customers and they would pay interest to encourage us to leave it on deposit with them, but times have changed. It looks as though the banks don’t want your savings and they are certainly not keen on paying a good rate of interest on them.
The Covid crisis is still not over, but it could be that normal life is becoming a real prospect for the near future. The Bank of England has even raised its own interest rate – the rate that underpins the rates the high street banks use, in an attempt to get inflation under control as the economy bounces back. Although the base rate increased from 0.1% to 0.75% in recent months, the banks don’t seem too keen to pass on the increase to savers. You might still only earn 0.01% on easy-access deals from banks such as: Barclays, Lloyds, HSBC and NatWest.
The simple reason is that they are already awash with cash, having benefited from an additional £187 billion savings, accumulated since the start of the pandemic and a total of around £974 billion sitting in easy-access accounts. They do not need to pay you to look after your money and the reserves are so high that this is unlikely to change any time soon.
It is possible to earn slightly better rates on your savings with some smaller banks and online providers. Your financial adviser could help you find the best performing accounts, but it might still be difficult to earn more than around 0.75%. This is of course substantially below the current inflation rate of 6.2%, meaning that your savings will decline in value in real terms.
With investments, your cash is used to buy something, such as stocks and shares. These may rise and fall in the short-term, but if you invest carefully for a few years, you have an excellent chance of riding out these ups and downs and taking advantage of long-term potential growth in the markets to provide capital growth or income.
The UK lending market is constantly evolving, traditional lending has changed and gone are the days where if an SME needed funding, they would be limited to just one of the four main high street banks. Fast forward to 2022 and with over 3,000 bank branches closing since 2015, there are fewer bank relationship managers for SMEs to turn to.
Luckily, there are many alternative places to secure funding from, with over 360 lenders in the UK market and over 3,000 SME lending products available.
We are working with Capitalise to help our clients source alternative funding. As Capitalise accounting partners, we have access to 130+ lenders, high street banks, business finance providers and specialist grant providers. We can expand the reach of our funding enquiries, locating a greater range of funding products from asset finance to invoice finance, trade finance to VAT funding, refinancing, loan schemes and grants.
Research shows that most SMEs only start looking for finance less than seven days before they need the money, typically spending less than one hour in total researching. Additionally, 80% of SMEs still apply to just one lender for funding, usually their bank.
SMEs are four times more likely to get the funding they need when they partner with an accountant or business adviser. Get in touch with us to see how we could help you to get the funding that you need.
DIARY OF MAIN TAX EVENTS
APRIL / MAY 2022
|Corporation tax payment for year to 30/6/21 (unless quarterly instalments apply)
|2021/22 tax year ends on 5th April. 2022/23 tax year begins on 6th April.
|PAYE & NIC deductions, and CIS return and tax, for month to 5/04/22 (due 22/04 if you pay electronically)
|Corporation tax payment for year to 31/7/21 (unless quarterly instalments apply)
|PAYE & NIC deductions, and CIS return and tax, for month to 5/05/22 (due 22/05 if you pay electronically)