AAT responds to Spring Statement on National Insurance, windfall taxes and business support schemes

AAT has responded to today's Spring Statement from the Chancellor Rishi Sunak. Commenting on some of the key announcements, Adam Harper, Director of Professional Standards and Policy, AAT, said the following.

Changes to National Insurance contributions threshold

"We fully support an increase in funding for the NHS and social care and agree that such an increase should not be funded by more borrowing and debt. We were pleased to see that the National Insurance contributions threshold will be raised by £3,000 from July, but were disappointed that the government is still pressing ahead with the proposed National Insurance contributions increase from next month.

"National Insurance increases will disproportionately impact people on lower incomes, whilst people with income from state and private pensions, or who earn an income from property, will pay nothing. Meanwhile, employers are already facing unprecedented challenges due to staff and materials shortages, increased costs and the ongoing effect of Brexit and the pandemic – as well as the conflict in Ukraine – and a rise in National Insurance contributions will only slow the UK's economic recovery further.

"Instead, we would urge the government to deliver an alternative package of measures involving changes to capital and personal taxes, including making all of the UK's 1.3 million working pensioners liable for National Insurance contributions. This would raise a similar sum to the National Insurance contributions increase, but in a fairer and more effective way.

"This approach should also form part of a longer-term solution to reform the tax system and make it simpler, fairer and more effective for taxpayers and HMRC alike. To outline how this might be achieved, AAT recently published our new Time for Change report, which includes articles from a wide range of commenters offering potential solutions. We would urge the government to commit to a strategic, long-term approach to tax, pause the introduction of new tax changes for three to five years and publish a clear tax strategy. This would provide stability for planning, enable the public and politicians to hold the government to account, and deliver economic and social benefits by delivering a fairer system for all."

Windfall taxes on energy companies

"We were pleased to see the Chancellor take steps on investment in sustainable energy, including removing VAT from sustainable building improvements such as solar panels and insulation as well as wind and water turbines, and announcing further energy security measures to come in future. However, concerns were raised that this did not go far enough and that the Chancellor should have announced further measures, such as a windfall tax on gas and oil companies.

"There are many arguments that windfall taxes would help to reduce bills for hard-pressed customers and businesses, particularly small businesses. Labour's Pat McFadden, the Shadow Chief Secretary to the Treasury, set out the case for this in AAT's new Time for Change report, which includes several suggested approaches on how to develop a fairer and more effective tax system.

"AAT has previously been reluctant to support such taxes, as often these increases are simply passed on to customers in the form of price rises – something we would wish to avoid at a time when many people are already struggling financially. However, if these could somehow be avoided or minimised, then we would support a short-term windfall tax whilst energy prices remain high.

"Nevertheless, a windfall tax would only be a small part of the solution to this issue, and we would urge the government to take a longer-term approach to reform the tax system and make it simpler, fairer and more effective for taxpayers and HMRC alike. AAT's new Time for Change report features articles from a wide range of commenters offering potential solutions to achieve this. We would therefore urge the government not to introduce new taxes for three to five years whilst committing to a more strategic approach and then publishing a clear tax strategy. This would improve stability, enable politicians and the public to hold the government to account, and provide economic and social benefits through creating a fairer tax system for everyone."

Continued support for small businesses including Help to Grow schemes

"We were pleased to hear the government's continued support for small businesses, including the Help to Grow: Management and Help to Grow: Digital schemes, the announcement that business investment tax rates will be cut in the Autumn Budget, and that the government will look at reforming the apprenticeship levy to provide more incentive for business. We look forward to engaging further with the government on this in the coming months.

"However, we were disappointed that there were no changes to eligibility for the Help to Grow schemes announced today. Although both of the schemes have real potential to boost small businesses across the UK, the current eligibility criteria excludes over 90% of small businesses – including most of AAT's 5,000 Licensed Accountants and the majority of their 500,000 small business clients. We have been campaigning for a relaxation of the criteria since 2021, including writing to the government highlighting the restrictions earlier this year. Reforming this would benefit thousands of small businesses – as well as the wider UK economy – at a critical time in their recovery from the impact of the Covid-19 pandemic."