Page 8 - Spring Statement - March 2022

Value added tax

The reduced 12.5% rate for hospitality, holiday accommodation and attractions will end on 31 March 2022, at which
point the rate will revert to the 20% standard rate.

Student loans

Although not a Budget measure, the changes to student finance announced earlier this year were largely seen as
driven by the Treasury. For former students repaying Plan 2 student loans (provided in England & Wales for courses
starting from September 2012 onwards) the repayment income threshold will be frozen at £27,295 until 2025/26. For
Plan 1 loans (earlier English and Welsh students) the threshold rises by 1.5% to £20,195 for 2022/23. The same
percentage level of increase applies to Plan 4 loans (Scotland only), with a new threshold of £25,375. Further changes
apply for new students from academic year 2023/24.

The reform of student finance produces a significant impact on government finances, partly because of the way in
which projected loan write-offs are capitalised. For example, in 2022/23 the Exchequer will benefit by over £11bn
because it can expect to write off much less of the outstanding Plan 2 loans thanks to higher repayments. Gains then
fall to £3.8bn in 2023/24, rising to over £7bn by 2026/27. The corollary is that graduates will be correspondingly
poorer.

So what to do?

All tax changes current, imminent and future need to be factored into your financial plan. Those
announced in the Spring Statement and those already announced are no exception.

This is especially important as we run up to the end of the current tax year and set financial plans
(incorporating tax efficiency) for the new tax year that is about to start.

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