Key Points

• Increase in NI threshold welcome but Chancellor could have delayed 1.25% hike
• Reduction in Basic Rate Tax will help offset freezing of Income Tax bands
• Twelve-month fuel duty cut applies proportionately to red diesel but prices have soared

Financial advisers at leading rural insurer NFU Mutual welcomed tax cuts in today’s Spring Statement but say the Chancellor could have gone further to help with the cost of living crisis in the countryside.

While inflation is expected to average 7.4% this year, farmers are struggling with even higher price rises in fuel, energy, fertiliser and other materials they need to keep their businesses running.

On fuel duty, Sean McCann, Chartered Financial Planner at NFU Mutual, said: “The Chancellor had to do something to reduce the impact of soaring fuel prices and cutting fuel duty was always on the cards but the reality is a 5p cut is unlikely to make a material difference with prices so high.

“Fuel duty has been cut from 57.95p per litre to 52.95p per litre for 12 months, with VAT charged at 20% on top, so petrol and white diesel are still double taxed and highly so.

“The spiralling cost of petrol and diesel is having a huge impact on people in the countryside and farmers who need it to run their businesses.

"The government has said ‘where practical’ a proportionate cut will also apply to duty on red diesel, which is expected to reduce it by just under a penny per litre. However, the price of red diesel is roughly double what it was this time last year, impacting food production at a crucial time for farming.”

On the £3,000 increase in National Insurance threshold Sean said: “Raising the thresholds for employees and the self-employed National Insurance by almost £3,000 goes some way to mitigating the impact of the 1.25 percentage point rise coming in April.

“All workers will benefit from this threshold increase, which will cost the government £25.9bn over the next five years, but it will make a real difference to many low earners.

“However, it’s disappointing the Chancellor didn’t go further and delay the hike in National Insurance, which will still hit employees and farm businesses hard at a time when costs for fuel, energy, and fertiliser are all spiralling.

“The threshold at which employers begin paying national insurance remains frozen with increased employers’ national insurance contributions due to take effect from April.

"Employees and employers can reduce the impact of the 1.25% increase by making a pension contribution though a salary sacrifice arrangement.”

On the reduction of basic rate Income Tax, Sean said: "The Chancellor's announcement that he would cut the basic rate of Income Tax from 20% to 19% in 2024 is a welcome move that will impact millions of people.

“However, the freezing of Personal Allowance and income tax bands until 2026 will reduce the benefit for many working families."