The Chancellor Rishi Sunak will unveil his Spring Statement on Wednesday against a backdrop of soaring inflation and energy bills – and a rise in National Insurance.

Here’s a quick guide to what the statement is and what Mr Sunak might announce when he gives his speech in the House of Commons at 12.30pm…

What is the Spring Statement?

The Spring Statement is a ‘mini-Budget’ by the Chancellor that focuses on the overall health of the economy.

It’s unlikely to include major announcements about tax or spending because these usually happen once a year in the Budget.

But you can expect Mr Sunak to talk about the Office for Budget Responsibility’s latest forecasts for the economy and public finances.

And the statement could see the launch of consultations on potential new policies, while previously announced policies might be ‘tweaked’.

The rising cost of living

Mr Sunak is under pressure to help households struggling to cope with the cost-of-living crisis.

Living costs have continued to rise because of several factors, including the increase in oil and gas prices.

Meanwhile, the war in Ukraine could push food and energy prices up even more.

In fact, the Bank of England expects inflation to reach 8% this spring and could rise even higher later in the year.

Will the National Insurance rise go ahead?

In September last year, MPs voted to increase National Insurance contributions (NICs) by 1.25% from April 2022.

Many are now pushing for this rise to be cancelled because of the cost-of-living crisis.

But rather than ditch the hike in NICs completely, could the Chancellor alter it instead? For example, could he decide to raise the threshold at which you start paying the levy?

Other taxes

There’s unlikely to be any changes to capital gains tax (CGT) in this week’s statement.

But there is speculation Mr Sunak might opt for a short-term cut in fuel duty, especially because of the global impact on petrol and diesel prices after Russia’s invasion of Ukraine.

And could he decide to backtrack on his announcement last year to freeze income tax thresholds until 2026? There are rumours he could announce a rise for some or all these tax thresholds.

Our Spring Statement predictions

It will be interesting to see what measures are revealed in the statement. However, given world events, it seems unlikely the Chancellor will make any drastic decisions that would add to the financial burden on individuals.

There’s a fine balancing act between raising much-needed funds and stifling the economy. So, we suspect that, yet again, many tax-raising changes will need to be put on hold.

But, as ever, we’ll be keeping a close eye on any announcements.

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Steph Churchill

Stephanie Churchill

Managing director & co-owner of Churchill Taxation