The 2022 Spring Statement - How Will I Be Affected?

By Leeds Credit Union
25/03/2022

Ever since Wednesday's mini-budget was announced by Chancellor of the Exchequer Rishi Sunak, people have been scratching their heads as to how exactly the new changes will affect them. 

Here, we take a look at the key points from the Spring Statement to help you understand what it means for you.

Fuel prices

Fuel prices have been reduced by 5p per litre and will remain at the lower price until March 2023.

According to calculations, the 5p cut will reduce approximately £3 from the cost of filling a 55-litre family car, with the Treasury claiming this will equate to a saving of roughly £100 a year for the average car driver, £200 for van drivers and £1,500 for hauliers.

However, with fuel prices having recently risen steeply, it could be argued that this reduction doesn't go far enough as, in reality, it actually only brings prices back in line with last year's levels.

Energy bills

With the energy price cap set to increase significantly on April 1st, many households' primary concern right now is the rising cost of energy. Consequently, many experts had hoped that measures designed to reduce energy bills would be announced in the Spring Statement. 

Unfortunately, little to no help for ordinary households was announced by the Chancellor. Instead, VAT will be scrapped on energy efficient measures such as solar panels and heat pumps in an attempt to encourage more people to have energy saving devices fitted in their homes. 

Mr Sunak said : "A family having a solar panel installed will see tax savings worth over £1,000 and savings on their energy bill of over £300 per year.”

While it's good to see the Government thinking about energy efficiency, it's hard to see how this measure will help families who are struggling to afford their energy bills, never mind solar panels and heat pumps.

Income tax and National Insurance

The basic rate of income tax has been cut from 20% to 19%, effective 2024, while the national insurance contribution threshold has been raised, meaning workers will now be able to earn £12,750 before paying any income tax or NI, a move that will see 70% of people paying less national insurance.

According to financial service company Hargreaves Lansdown, this means that someone earning £14,500 a year will now be £336 better off. Higher earners bringing home between £40,000 and £50,000 will be worse off, however, with some now standing to lose out on more than £100 per year.

The raising of the NI threshold is extremely good news that is sure to be welcomed with open arms by lower and average earners, while the promise of an income tax cut also comes as a relief.

Benefits

Regrettably, no additional support has been announced for those on universal credit, in what is a bitter blow to millions of low income households across the UK as the cost of living continues to rise.

Household Support Fund

The Treasury is doubling its support for vulnerable families to ensure they continue to get assistance with their food, energy and water bills, bringing the total amount available to local councils to £1bn.

Although the amount available to each family varies depending on the criteria of the council in the area in which they live, this announcement is great news for financially unstable households. For more information click here.

Pensions

No announcements were made regarding pensions, meaning those with private pensions might well need to dip into their savings as the cost of living crisis worsens. 

Furthermore, the reduction in the basic rate of income tax is bad news for private pension holders as it means people will get lower relief on their pension contributions, so the government top-up will be less. As a result, people will now need to pay more into their pensions in order to get the same retirement income.

Our conclusion

Sadly, with the cost of many everyday goods and services continuing to sky-rocket, the Chancellor's mini-budget contains very little good news for average households.

As a result, our advice is to continue being as cautious as possible with your money and do everything you can to reduce your energy bills (read our top-tips on how to do so here). However, if you are experiencing financial difficulties, one of our small loans or savings accounts could help you regain financial stability - click here for more information.