Spring Statement 2022

(3 minutes to read)

With the cost of living rising sharply over the last few months, many have been eager to learn what the Spring Statement will bring. Here’s what you need to know as an umbrella contractor.

National Insurance

We were already aware that National Insurance would be rising on the 6th of April 2022 by 1.25%.

The employers NI is increasing to 15.05% (previously 13.8%) and the employees NI is increasing to 13.25% (previously 12%).

It was hoped that Chancellor Rishi Sunak would scrap the ‘Health and Social Care Levy’ altogether – unfortunately this was not the case.

For umbrella company contractors, a rise in NICs comes as a double blow due to the way in which an umbrella company works. There’s not only the employees NI rise to take into consideration, but also the increased costs that will come from their umbrella company’s overheads (due to the company paying out more for inflated Employer NIC).

The only change made to the NICs is that the will be a £3,000 lift in thresholds from July, and so the level that workers start to pay NI will rise from £9,800 to £12,750.

The Chancellor said that this will save some tax payers an extra £330 a year.

Despite this, there’s no denying the fact that these additional charges will result in an umbrella company contractor seeing a reduction in their take home pay, unless clients and agencies uplift the assignment rates in order to cover the additional costs.

Income Tax

Although a tax cut is always welcome, the announcement of a 1p reduction has been met with disappointment due to this not coming into effect until 2024.

Fuel Duty

As from the 23rd of March at 6pm, fuel duty was cut by five pence per litre.

Many umbrella company contractors will need to travel for work and so this cut will be very much welcomed, however, there have been criticisms that this still doesn’t seem enough and the Chancellor could have reduced it further.

No Mention of Umbrella Company Regulation

It was hoped that the Chancellor would suggest the regulation of umbrella companies through the Single Enforcement Body (SEB).

In 2021, Victoria Todd, Head of the Low Incomes Tax Reform Group (LITRG), stated, “Regulation would drive away those umbrella companies that do not respect employment law, which will help protect lower paid agency workers who are vulnerable to exploitation.”

However, there was no mention of creating any sort of intervention that would regulate the umbrella sector and ultimately remove the promoters of tax avoidance.

We hope you found this page helpful. Our team of experts are available to answer any questions you may have, so drop us a line on 01206 591 000 or email Jaime at jaime.thorpe@contractorumbrella.com.

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