UK inflation accelerated to 9% the highest level since 1982. The unemployment rate fell to 3.7% the lowest since 1974, with job vacancies exceeding the number of jobless for the first time on record. However, UK consumer confidence dropped to its lowest level in nearly 50 years.
The chancellor focused on the post covid recovery and did not tinker much with pensions and investments.
The key measure that we already knew about was the 1.25% increase to National Insurance and Dividend rates which will come into effect in April 2022. Due to Government IT constraints it will initially be collected via NI and in April 2023 it will be a separate tax called the ‘health and social care Levy’.
This Levy will be applied if your pay is above the primary earnings threshold of £9,568. You are caught if you pay yourself dividends above £2,000, and if you are working above the State Pension age.
Therefore the dividend ordinary rate, upper rate and additional rate will increase to 8.75%, 33.75% and 39.35% respectively.
For business owners the employer NI will also rise 1.25% to 15.05%. As corporation tax will rise in April 2023 it would be prudent to talk to your accountant to bring forward profits if possible.
Key allowances have not changed:
- High rate income tax band starts at £37,700 + £12,570 = £50,270
- Capital Gains Tax annual exempt amount is £12,300
- ISA annual subscription limit is maintained at £20,000 and JISAs £9,000
The US Senate passed a roughly USD 1 trillion bipartisan infrastructure package, including about USD 550 billion in new spending. This is aimed at rebuilding traditional transportation infrastructure, improve access to broadband internet in rural areas and upgrade the electric grid and water systems. The Senate Democrats also approved a USD 3.5 trillion budget resolution.
China released a five-year blueprint calling for increased regulation affecting key parts of the economy. The document signalled Beijing’s intention to draft new laws covering national security, technology, monopolies and education. In the technology sector, new legislation will cover areas such as online finance, artificial intelligence, big data and cloud computing.
The European Central Bank (ECB) revised its forward guidance, indicating it would keep interest rates “at their present or lower levels until it sees inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at 2% over the medium term.” The ECB indicated that this process could involve a short period in which inflation goes moderately above this target.
Consumer prices in America rose 5.4%, well above expectations. There are a small number of huge price rises, such as used cars, whereas the median price change is far lower.
In the UK CPI rose 2.5%. The Office for National Statistics cited increased prices for food, fuel, second-hand cars, clothing and footwear as key factors.
Last month America’s consumer prices inflation rate rose to 4.2% from 2.6% and this is before the full effects of the Biden stimulus plans take affect. Eurozone inflation accelerated to 1.6% year-on-year in April, up from 1.3% in March, following a sharp rise in the cost of energy compared to the height of the pandemic. UK annual inflation meanwhile more than doubled in April to 1.5% from 0.7% in March, although both remain below central bank target rates of 2% for now.
Saudi Arabia shocked the markets by raising pricing for oil customers after cutting supply by 1 million barrels a day in February and March.
The package is made up of €390bn programme of grants and the rest in loans.
UK Chancellor of the Exchequer Rishi Sunak pledged an additional GBP 30 billion to support employment, on top of the GBP 133 billion in coronavirus measures he has already unveiled. The money includes over GBP 5 billion in accelerated infrastructure spending, about GBP 9 billion for employers to retain workers through the end of January, funds for home insulation, and help for homebuyers and for hospitality firms.