Spring Statement 2022: Five things you might want to do now

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This week, Chancellor Rishi Sunak unveiled his Spring Statement and there are a few major changes.

The most immediate of which was fuel duty: it’s been reduced by 5p per litre. At the same time, taxes on alcohol, cigarettes and other tobacco products have been frozen.

The Household Support Fund – which was designed to support families financially over winter – has also been extended and expanded.

Then in April, there will be a reduction in VAT for home insulation, heat pumps and solar panels.

And in July, the threshold for paying National Insurance (NI) will be raised to £12,500.

Although for a reduction in income tax, we’ll have to wait until 2024.

With so many changes happening, I wanted to look at some of the changes you might want to make, too.

Compare petrol prices

Although fuel duty has been cut by 5p per litre, like the VAT cuts made during the pandemic, retailers aren’t obligated to pass those savings onto consumers.

Fortunately, several major supermarkets, including Asda, Sainsbury’s and Tesco, have already made the changes at the pumps.

This should put pressure on other retailers in the longer run.

But until then, you may want to check petrol prices before you fill up.

You can download the free PetrolPrices app for this – it’s available on Apple and Android but you’ll need to sign up for a free account first.

Check your income

National Insurance Contributions (NIC) are going up from the start of the next tax year – 6 April 2022 – as a result of the additional health and social care levy.

Exactly how much more you’ll pay will depend on your NI category but even pensioners aren’t exempt.

The NIC threshold is being raised to £12,500 in July to offset the cost of this additional contribution for those on lower incomes (you don’t have to pay any NI if your total income is below the threshold).

However, because the start date for the two changes are different, your monthly income will vary significantly between April to June and July onwards.

It’s therefore worth checking what your take home pay is so you can properly budget if you need to.

The Guardian has a handy table about halfway down this article that shows you how your income might be affected in both time periods at a glance.

Alternatively you can plug in your own numbers into the Blick Rothenberg calculator (they provide a version to all major news outlets) to see your own projections.

Look into the Household Support Fund

If you’re currently struggling financially, do check whether you’re eligible for help under the Household Support Fund.

The support scheme was originally meant to end on 31 March 2022, with a funding pot of £500 million.

But now the Chancellor has announced an extra £500 million of funding from April – there doesn’t appear to be an end date to the scheme at the moment.

The fund is administered by local authorities, so you’ll need to get in touch with yours to see what help is available.

Pay into your pension

Income tax for basic rate taxpayers is due to come down from 20% to 19% from April 2024. 

While it’s a pretty tiny percentage change, and it’s not happening for a while, it does have potentially huge implications for your pension.

When you pay into a pension, you get tax relief from the government based on your highest tax band – this Focus explains a bit more about how that works but it’s basically like free money.

The tax relief on pensions is based on your highest tax band so a lower income tax also means lower pension tax relief – in effect, less free money from the government.

So before the change happens, it may be worth paying more money into your pension to take advantage of the slightly higher tax relief.

There are a couple of things to note when weighing up the pros and cons.

First, only pay what you can afford into your pension. 

While it’s important to have a pension, you won’t get that money back until you retire, or unless you’re suffering from a terminal illness.

If paying into a pension means you’ll likely get into debt, it’s just not worth it.

Second, bear in mind that you do get taxed when you withdraw your pension – only a quarter is tax free, the rest is seen as income and is taxed accordingly.

Because of that, you could win or lose in the tax stakes in the long run.

Green up your home

If you’ve been thinking about home improvements, it may well be time to think about introducing some upgrades to your property’s green credentials.

The Chancellor has slashed the VAT on home insulation, heat pumps and solar panels from 5% to zero.

The details are thin at the moment, and it’ll take a while for the price changes to trickle through, but it’s definitely worth bearing in mind.

Home insulation is particularly worthwhile, and isn’t always hugely expensive.

As for solar panels and heat pumps, the outlays cost a lot more and the returns are hugely variable so you should certainly consider all the pros and cons before you jump in.

There may be local home energy grants to help you cover some of the costs though.