Mitigating the impact of the 2022 Budget

Every year the Budget introduces financial changes that we all have to adjust to. But against the backdrop of many months of economic uncertainty, this year’s announcements are causing more concern than usual.

So, what exactly did this year’s Budget bring and how are individuals and businesses affected? If you’re still catching up on announcements, check out our guide to the Budget at a glance.

The important thing to remember, said David Fort, Partner at Haines Watts Manchester, is that it’s not all doom and gloom.

“My advice is, don't panic. Most of our clients are very robust, very good at what they do and can manage their businesses well. We'll be here to support them, and see how we can get through this.”

So, what practical steps can you take to mitigate the financial impact of Budget changes, whether you run a business or are concerned about personal savings? We break it down to help you.

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Becoming more tax efficient

The announcements lacked the dramatic tax increases that had been anticipated. However, many tax thresholds are staying frozen until 2028 instead of rising with inflation. This causes what’s known as “fiscal drag”, where more people are dragged into the tax net than would have been otherwise.

The best way to mitigate this? Take a broader look at your finances and make them as tax efficient as possible, said Haines Watts’ Head of Private Client, Nicola Goldsmith. “Anything you can do that's going to save you tax is money kept in your pocket.”

Make better use of your ISAs

If you’ve got the ability to save, start by making better use of your ISAs.

“If you've been relying on things like capital gains in the past, now is the time to start using that ISA in a way that you haven't been in the past,” said Nicola.

Make your pension pay

Pensions are very tax efficient, but they don't offer immediate disposable income. “If you've got money coming in, pensions can be a tax efficient option, but it’s sensible to consider what the savings are and where your money is best placed for you,” Nicola advises.

How business owners can stay tax efficient

Extract your funds

If you’re self-employed or you run your own business, consider how you can extract your funds and keep them safe. Talk to a financial advisor about what will work for you.

“We can work with business owners to look at the best ways to do this,” said Nicola. “For example, it might work well if family members work for the business in order to extract funds from the company.”

Look at your cash flow and profitability

The increase in corporation tax rate will go ahead, which means a 25% rate for companies with profits above £250,000.

“This will be a concern for businesses when it kicks in next year, so it’s important to plan for that from a cash flow and profitability point of view,” explained David.

Investigate your options. It may be more tax efficient to pay bonuses rather than dividends, for example.

Getting advice on how to cope with the Budget changes

It’s likely that most people will end up paying a bit more in the long-run, so talk to a specialist about what can be done to help reduce the pain. We're here to help. Please get in touch with our team who are on hand to answer your questions and help you navigate the changes with confidence.

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