Spring Statement 2022 announces National Insurance threshold rise, Fuel Duty cut and Household Support Fund increase

The Chancellor announced a rise in the National Insurance threshold from £9,880 to £12,570 in July, a 5p cut to Fuel Duty rates and a £500 million increase to the Household Support Fund in the Spring Statement¹. The Resolution Foundation, an independent think tank, published its assessment of the measures on 24 March 2022¹.

The same assessment states that the Chancellor also announced a 1p cut in the basic rate of Income Tax for April 2024, which it says "looks set to save the average earner £243 a year"¹. It adds that the gains from that cut and from the higher National Insurance threshold are "more than wiped out" by previously announced tax rises, namely the Health and Care Levy and the freeze to Income Tax thresholds¹. In 2024-25, it says, 27 million out of the 31 million people in work will pay more Income Tax and National Insurance as a result of personal tax changes announced by Rishi Sunak, with households in the middle of the income distribution on average £535 a year worse off¹.

On the public finances, the assessment cites the Office for Budget Responsibility's borrowing forecasts improving by £42.4 billion over five years, and says borrowing across the forecast period is projected to be £25.6 billion lower than expected in the Autumn¹. It also cites the OBR doubling its forecast for 2022's inflation peak to 8.7 per cent, growth for 2022 revised down from 6 per cent to 3.8 per cent, and real wages projected to fall by 3.6 per cent over the course of 2022¹.

On distribution, the assessment says "Only £1 in every £3 for the measures announced yesterday will go to the bottom half of the income distribution", with households in the top half gaining an average of £475 compared with £136 for the poorest fifth¹. Taking the measures alongside previously announced support for energy bills and larger tax rises, it puts the average boost to household budgets next year at £110¹.

Why it matters for households

The National Insurance threshold change takes effect in July 2022, raising the point at which employees start paying contributions from £9,880 to £12,570¹. The Fuel Duty cut applies to rates, and the Household Support Fund increase adds £500 million to a fund administered by councils¹. The Income Tax cut is dated to April 2024¹.

The assessment says the typical working-age household faces an income fall of 4 per cent, or £1,100, in 2022-23, and that the poorest quarter of households are set to see their real incomes drop by 6 per cent as benefits fail to keep pace with rising prices¹. It projects that a further 1.3 million people will fall into absolute poverty next year, including 500,000 children¹. It also says typical non-pensioner income is projected to be 2 per cent lower at the next election than at the previous one¹.

For context on how National Insurance works, see our guide to National Insurance: classes, rates and what it pays for, and for the wider picture see the tax hub.

What happens next

The National Insurance threshold rise takes effect in July 2022, and the 1p cut in the basic rate of Income Tax is announced for April 2024¹. The assessment states that the Chancellor's headroom against his fiscal rules has increased to £28 billion from the £18 billion forecast in October 2021, which it says is equivalent to a further 4p to 5p cut in the basic rate of Income Tax¹. It adds that the package "looks likely to be far from the last word"¹.