News Archives - Page 2 of 23

Using allowances and exemptions could reduce your overall tax bill and help you get more out of your money. On 5 April 2025, the current tax year will end, and many tax-efficient allowances and exemptions will reset. So, here are five that you may want to consider using before the 2025/26 tax year starts.

1. ISA allowance

ISAs provide a popular way to tax-efficiently save and invest. Indeed, the latest government figures show in 2022/23, 12.4 million ISAs were subscribed to with around £71.6 billion being collectively added to accounts.

For the 2024/25 tax year, you can add up to £20,000 to ISAs. If you hold money in a Cash ISA, the interest you receive wouldn’t be liable for Income Tax. Similarly, if you invest through a Stocks and Shares ISA, any returns generated aren’t liable for Capital Gains Tax (CGT).

If you don’t use your ISA allowance before the tax year ends, you’ll lose it. So, it could be worthwhile reviewing your saving and investing goals now.

Before you place money into an ISA, it’s often a good idea to consider your goal. For short-term goals, a Cash ISA might be suitable for your needs. On the other hand, if you’re putting money away for a goal that’s more than five years away, you may want to consider if you could benefit from investing.

In addition, if you’re aged between 18 and 39, you could open a Lifetime ISA (LISA). In the 2024/25 tax year, you can add up to £4,000 to a LISA and receive a 25% government bonus. The £4,000 LISA allowance counts towards your overall £20,000 ISA allowance.

However, if you withdraw money from a LISA before the age of 60 for a purpose other than buying your first home, you’d pay a 25% penalty. As a result, a LISA is often most suitable for those saving to get on the property ladder.

2. Dividend Allowance

If you’re a business owner or hold shares in some companies, you might receive dividends.

You don’t pay tax on dividends that fall within your Personal Allowance, which is £12,570 in 2024/25. In addition, you can receive up to £500 in dividends before Dividend Tax is due under your Dividend Allowance. So, dividends could offer a valuable way to boost your income without increasing your tax liability.

You cannot carry forward unused Dividend Allowance.

Even if your dividends could exceed the allowance, the tax rate you pay could be lower than receiving a comparable amount that was liable for Income Tax. The rate of Dividend Tax you pay depends on your Income Tax band. In 2024/25, the rates are:

Basic rate: 8.75%
Higher rate: 33.75%
Additional rate: 39.35%

So, making dividends part of your financial plan could reduce your overall tax bill even if you’re liable for Dividend Tax.

3. Capital Gains Tax Annual Exempt Amount

Chancellor Rachel Reeves made several changes to CGT in the Autumn Budget, including increasing the main rates. Consequently, you could find your tax liability is higher than expected when you make a profit when you dispose of some assets.

Indeed, the Office for Budget Responsibility estimates CGT could raise £15.2 billion in 2024/25, which may then increase to £23.5 billion in 2028/29.

From 30 October 2024, the standard rates of CGT are:

24% if you’re a higher- or additional-rate taxpayer
18% if you’re a basic-rate taxpayer and the gains fall within the basic-rate Income Tax band.

Importantly, the Annual Exempt Amount means you can make profits of up to £3,000 in 2024/25 before CGT is due. So, if you plan to dispose of assets, timing the decision to make use of this exemption could be valuable.

You cannot carry forward the Annual Exempt Amount into the new tax year if you don’t use it.

4. Pension Annual Allowance

Pensions provide a tax-efficient way to save for your retirement as contributions benefit from tax relief and the interest or investment returns generated are tax-free.

In 2024/25, the Pension Annual Allowance is £60,000 – this is the amount you can tax-efficiently add to your pension in a single tax year, so you might also need to consider employer contributions and those made by other third parties. However, you can only claim tax relief on up to 100% of your annual earnings, or £2,880 if you’re a non-taxpayer.

There are two reasons why your Annual Allowance may be lower.

If your adjusted income is more than £260,000 and your threshold income is more than £200,000, the allowance will taper. For every £2 your income exceeds the adjusted income threshold, your Annual Allowance will fall by £1. The tapering stops at £360,000, so everyone retains an allowance of £10,000.
If you’ve already flexibly accessed your pension, the Money Purchase Annual Allowance may affect you. This reduces the amount you can tax-efficiently add to your pension to £10,000.

You can carry your Annual Allowance forward for up to three tax years. So, you have until 5 April 2025 to use any unused allowance from 2021/22.

5. Inheritance Tax annual exemption

Government figures suggest Inheritance Tax (IHT) bills are on the rise. Indeed, IHT tax receipts between April 2024 and October 2024 were £5 billion – around £500 million higher than the same period last year.

If your estate could be liable for IHT when you die, passing on wealth during your lifetime could be a valuable way to reduce a potential bill.

However, not all gifts are considered immediately outside of your estate for IHT purposes. Some may be included in your estate for up to seven years, which are known as “potentially exempt transfers”.

So, using allowances and exemptions that enable you to pass gifts to your loved ones without worrying about IHT might be an important part of your estate plan.

In 2024/25, the annual exemption means you can pass on £3,000 without worrying about IHT. You can carry forward your annual gifting exemption from the previous tax year, so you could gift up to £6,000 in a single tax year and have it fall immediately outside your estate.

There are often other allowances or ways you could reduce your estate’s potential IHT bill. Please contact us to talk about steps you may take.

Get in touch to discuss your end-of-year tax plan

If you’d like to talk about which allowances and exemptions you may want to use to reduce your tax bill in 2024/25, please get in touch. We’ll work with you to help you understand which steps could be right for your circumstances and aspirations.

Please note:

This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate tax planning, Inheritance Tax planning, or estate planning.

While you might have similar goals or circumstances to other people, a financial plan isn’t a one-size-fits-all solution. Instead, a tailored financial plan that considers your needs and goals could help you get far more out of it.

For instance, one goal might be to ensure you’re financially secure in retirement. It’s likely to be something many other people are working towards too, but that doesn’t mean your retirement goals are the same. There could be many differences, which may affect how much you need to save. For example:

What age would you like to retire?
Are you entitled to the full State Pension?
Will you be retirement planning with a partner?
What kind of retirement lifestyle are you looking forward to?
Do you have a defined benefit pension that will provide a reliable income?
Will you be financially supporting dependents or other loved ones during your retirement?

So, even if you’re working in a similar position and are hoping to retire at the same time as a colleague, the amount of income you need in retirement could be vastly different.

A tailored financial plan could help you understand your finances so you’re in a better position to make decisions that are right for you. Here are three compelling reasons why a tailored financial plan could benefit you.

A bespoke financial plan will understand your circumstances

Different circumstances and priorities could mean your financial situation is very different from another person’s, even when you have broadly the same income.

As a result, basing your financial decisions on what other people are doing, rather than tailoring them to you, could mean you make choices that aren’t right for your circumstances.

For instance, a friend may tell you that it’s too risky to invest and that saving is a better option. This might be the case for them. Perhaps they don’t have an emergency fund and are choosing to build that up first, or are saving for a short-term goal so investing would be inappropriate. However, it doesn’t mean that investing couldn’t be right for you.

Reviewing your options with your financial position in mind could help you balance potential risks and make decisions that are right for you.

Your goals will form the heart of your financial plan

While understanding your financial situation is an important part of creating an effective long-term plan, just as crucial are your goals – what do you want to use your wealth for?

Once again, everyone is on their own path, so if you made financial decisions based on the aspirations of another, it could mean you miss out on opportunities to turn your goals into a reality.

For example, someone who wants to retire early might increase their pension contributions so they’re able to achieve a sustainable income once they stop work. Putting extra money aside for retirement might seem sensible, but that may not align with your aspirations. If your focus is to give your children a helping hand when they reach adulthood, you might contribute to a Junior ISA instead, or if you dream of setting up your own business, you may want to use some of your wealth to invest in it.

An effective financial plan is about understanding how your income and assets could be used to help you live the life you want, so tailoring it to your goals is essential.

A tailored financial plan could ease your fears

It’s not just your goals that a financial plan could help you manage, but your fears too.

Finances can seem complex, especially when you’re working towards goals that might be decades away. You may need to consider areas like investment risk, the effects of inflation, or how you’d cope if your income unexpectedly stopped. So, it’s not surprising that you might feel nervous when you look at your finances and consider the future.

A financial plan could help you address the fears that are worrying you. For instance, if you’re concerned you could lose your job, a financial plan might demonstrate how you could use your other assets to create an income stream if you need to.

Alternatively, if you have a family, you might be worried about how they’d cope financially if you passed away, so you may decide that life insurance could offer you peace of mind.

In this way, a financial plan could help you manage your fears so you’re better able to focus on enjoying your life today.

Contact us to talk about your tailored financial plan

If you’d like to create a financial plan that’s tailored to your aspirations, worries, and financial circumstances, please contact us. As financial planners, we’ll work with you to build a plan that could help you reach your goals in the short and long term. Please contact us to arrange a meeting.

Please note:

This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

When you’re making financial decisions, it can be difficult to look at your options objectively. Indeed, factors like your past experiences and emotions may influence the conclusions you draw.

Behavioural finance seeks to understand how people make financial decisions and what factors influence them. Understanding some aspects of this area of study could help you identify when you’re making choices that aren’t based on logic or facts.

Over the next few months, you can read about some of the different factors that could be affecting you. Now, read on to discover how habits and experiences could cloud your judgment.

Financial habits start forming in childhood

Your relationship with money might go back further than you think, and these early habits could still influence your decisions today.

In fact, a 2013 study published in the Telegraph suggests most children have formed financial habits by the time they’re seven. By this age, children often recognise the need to plan ahead with money and why you might delay decisions until a later day.

Money views that are reinforced while you’re young could go on to affect how you approach managing your finances in adulthood.

For example, a child who grows up in a household where money is scarce might develop a habit of frugality. While not overspending is positive, it could lead to a fear of spending that means they miss out on opportunities.

It might affect their long-term financial decisions too. A person who is worried about losing money might avoid investing or be overly cautious. So, their relationship with money could result in overlooked opportunities to grow their wealth over a long-term time frame, even when it’s appropriate for them.

Similarly, if you saw your parents making frequent impulsive purchases, you might be inclined to do the same.

It’s not just childhood where potentially harmful money habits are formed. The experiences you have as an adult could also influence your decisions.

Let’s say the first time you invest you lose some of your money. You might decide that investing isn’t right for you based on this outcome, even though the investment risk associated with new opportunities and your circumstances could be very different.

4 practical ways you could change your financial habits

The good news is that it’s possible to change financial habits and learn to recognise when past experiences are affecting your ability to weigh up options.

1. Have a clear financial vision

Being clear about what you want to achieve with your finances could help inform your decisions.

For example, if you’re focused on building a pension that will provide you with an income you can comfortably retire on, you might plan to invest your savings, so they have a chance to grow at a faster pace. Understanding why this is the right decision for you could mean you’re less likely to alter your investments, even if you’re fearful due to previous experiences.

2. Learn to spot when poor habits could affect you

Learning to recognise when you’re more likely to fall into negative habits may help you improve your financial behaviour. If you’re unsure where to start, keeping track of your financial decisions might be useful.

For instance, you may realise you’re more likely to overspend when you’re feeling low. You might then create a separate pot for your disposable income so your spending can’t affect other goals. Or if you note frequently checking the performance of your investments leaves you wanting to make adjustments, you may limit how often you review them.

3. Evaluate your decisions carefully

You’re more likely to fall into poor decision-making patterns if you rush. If you don’t have enough time to go through your options properly, using past experiences to decide provides a shortcut. However, it could mean you’re not making decisions based on all the information that’s available to you.

Where possible, give yourself more time to consider what’s right for you. While you might feel like you need to make a decision quickly, giving yourself some time could ultimately be more valuable.

Once you’ve made a decision, interrogating it can be useful as well – why have you come to that conclusion? What influenced your choice?

4. Get an outside perspective

It can sometimes be more difficult to spot your negative habits than it is in others. So, getting an outside perspective may be invaluable.

Simply having a conversation about your plans might highlight how previous experiences are influencing your decisions. Or the other person may be able to point out that you’re not acting in your best interests because you’re sticking to old habits.

As a financial planner, we could offer you an outside perspective and help you understand how a financial decision might affect both your short- and long-term finances.

Contact us to talk about your financial plan

As your financial planner, we might help you identify when habits and experiences could be leading you to make a decision that doesn’t align with your financial plan. If you’d like to review your finances or have any questions, please get in touch.

Next month, read our blog to find out how emotions may affect your financial decision-making skills.

Please note:

This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

With 195 countries to choose from, deciding where to go on your next holiday can be tricky.

In a world where many popular holiday destinations are flooded with visitors and overwhelmed with inauthentic restaurants and shops, you might want to find a place off the beaten path so you can truly enjoy the country you’re visiting.

This is where Lonely Planet’s Best in Travel list can help.

Read on to learn more about the 10 best countries to visit in 2025 so you can decide on your next holiday destination.

1. Cameroon

2025 marks the 65th anniversary of Cameroon’s independence. With a wealth of exciting events happening to bring well-deserved attention to the nation’s extraordinary history and culture, there has never been a better time to visit.

Trek through the wilderness looking for mandrills, gorillas, and forest elephants in Parc National de Campo-Ma’an. Or explore the spectacular Art Deco and African Modernist architecture of the capital Yaoundé by day, then party to the beats of the music at night.

2. Lithuania

Lithuania recently earned the title of European Green Capital of 2025 for its protected forests, lakes, and sandy dunes lining the Baltic Sea. In fact, green space covers 61% of the country’s capital, Vilnius.

While you’re exploring the stunning natural landscape, don’t forget to visit the recently restored Sapieha Palace or toast the city after dark with craft cocktails at Champaneria.

3. Fiji

This amazing 330-island archipelago is surrounded by 1.3 million square miles of sparkling ocean and has a whopping 460 protected marine areas brimming with sea life.

Explore these crystal-clear waters and their coral reefs by booking a scuba diving or snorkelling expedition, or head up to the country’s highlands and waterfalls to see the picturesque views from above.

4. Laos

With its newly launched, high-speed international rail connecting Laos’ mountainous plains with China’s bustling Yunnan Province, travel around the region’s pockets of nature and cultural heritage sites is easier and more affordable than ever before.

Adrenaline junkies can head to the rivers and mountains of Vang Vieng for biking, ziplining, or tubing adventures. But if you’d prefer to indulge in the ancient culture, schedule a day trip to Kuang Si Waterfall or the Old Quarter to join a sunrise alms-giving ceremony.

5. Kazakhstan

Hikers will adore Kazakhstan for the many trails you can explore in Sairam-Ugam National Park, as well as natural wonders such as the singing dunes in Altyn-Emel National Park.

If you’re not quite as adventurous, Kazakhstan is also known for its mouth-watering food. Enjoy a plate of beshbarmak, a celebratory dish made with horse or mutton, alongside other culinary delights in the country’s food capital, Shymkent.

6. Paraguay

Deep in the heart of South America, visit Paraguay to enjoy the relaxing atmosphere of the golden beaches of Carmen del Paraná or explore the plunging waterfalls in Saltos del Monday.

There’s also incredible wildlife to be spotted if you keep a keen eye out – including jaguars and giant anteaters!

7. Trinidad & Tobago

This twin-island Caribbean nation’s biggest attraction is Carnival: a months-long event that features steelpan competitions, stick-fighting battles, and calypso showdowns. Book your trip for 3 and 4 March 2025 to take part in the culmination of the festivities and experience the vibrant costume parades.

However, there’s plenty for you to enjoy at other times of the year. Go birding and turtle-watching at the Hadco Experiences Asa Wright Nature Center or visit the sacred Hindu pantheon, Temple in the Sea, which sits on the causeway in the Gulf of Paria.

8. Vanuatu

If you’re looking for a destination away from the crowds, Vanuatu is the place to go. With fewer than 45,000 tourists per year, the scenic trails around the islands’ jungle and beaches will make you feel like you’re exploring untouched parts of the world.

For those who want an adventure beyond drinking the nation’s signature beverage, kava, on the beach, you can visit the many volcanoes in Vanuatu – and if you’re lucky, you might even see Tanna Island’s Yasur volcano spurt some lava!

9. Slovakia

If you’ve yet to visit Slovakia, now is the time to go. Thanks to their focus on outdoor adventures, ecotourism, and ongoing restoration projects, there’s been no better time to see the architectural and natural wonders of this often-forgotten European country.

Hop aboard the Tatra Electric Railway and admire their famous Brutalist architecture with Bratislava’s topsy-turvy Slovak National Radio Building or explore underground labyrinths and the shimmering perma-freeze of the Dobšinská Ice Cave.

10. Armenia

Armenia currently remains relatively undiscovered to tourists, but that is about to change.

Immerse yourself in the culture by visiting the UNESCO-recognised monasteries of Geghard, Haghpat, and Sanahin, as well as the 2,000-year-old Garni Temple.

Plus, you might be excited to discover that Armenia’s wine scene is on par with any in the world. Enjoy a glass of their famous Arenia Noir in their stunning vineyards while dining on the local delicacies.

On 5 November 2024, US citizens voted for their next president, and the election had a knock-on effect on investment markets and business prospects around the world.

Republican Party nominee Donald Trump will serve a second term as president of the US. Trump has previously spoken about imposing harsh import tariffs, including a tariff of up to 60% on goods imported from China or a blanket 20% tariff on every US trading partner.

So, it’s unsurprising that the results of the election are being felt across the world. Indeed, Bloomberg’s Commodity Index suggests the prices of industrial metals and commodities have already slumped due to concerns about a “tit-for-tat global trade war”.

UK

The Labour government delivered its Autumn Budget at the end of October, and the repercussions were still being felt at the start of November.

Credit ratings agency Moody’s said the Budget would be an “additional challenge” for public finances as the announcements would do little to boost UK economic growth. It noted there was also a limited buffer if the UK faced a financial shock.

Similarly, S&P stated that public finances would be “constrained” but added that public investment plans could create a more business-friendly environment.

The FTSE 100 dropped to a three-month low on 8 November. This was partly due to retailers suffering losses as it became clear how higher rates of employer National Insurance contributions announced in the Budget could affect profitability. Marks & Spencer saw a 4.5% drop, and Tesco (2.9%), JD Sports (2.7%), and Sainsbury’s (2.5%) all suffered losses too.

On the same day, housebuilder Vistry issued its second profit warning in as many months, after it said cost overruns on building projects were worse than previously thought. This led to its share price tumbling almost 20%.

The headline economic figures released in November indicate the UK is stagnating.

According to the Office for National Statistics (ONS), GDP per head fell 0.1% in the third quarter of 2024 in real terms – the measure is used as an indicator of the country’s living standards.

In addition, ONS figures show inflation increased to 2.3% in the 12 months to October 2024. The rise could mean the Bank of England delays plans to reduce its base interest rate.

Readings from Purchasing Managers’ Indices (PMI) suggest business activity is weakening. However, some businesses may have paused investments and key decisions until the Budget was delivered, so activity could pick up in the final months of 2024.

In October, the British manufacturing PMI had a reading of 49.9 – slightly below the 50 mark that indicates growth. While still in growth territory, the service sector also slowed when compared to a month earlier with a reading of 52.

There’s already speculation about what a Trump presidency will mean for the UK.

The National Institute of Economic and Social Research said the protectionist measures planned by Trump could halve the UK’s economic growth in 2025 and 2026.

Yet, there may be some good news for investors. On the back of Trump’s victory, the pound weakened on 6 November. This led to the FTSE 100 jumping 1.3% as share prices lifted for multinational firms. For example, equipment rental company Ashtead, which would benefit from a strong US economy, saw a 6.6% boost.

Europe

While PMI readings suggest the eurozone economy is improving, it has recorded production falling for 19 consecutive months as of October 2024. The bloc’s two largest economies are playing a role in dragging down the figure as both France and Germany are affected by exports falling and weak demand.

Trump’s victory also had repercussions across Europe.

Shares in European renewable energy companies slid on 6 November as Trump has previously spoken about plans to boost US oil production. Danish wind turbine maker Vestas Wind Systems fell 8% and German solar energy producer SMA Solar Technology was down 10.4%.

Similarly, the threat of tariffs from the US hit German carmakers on 6 November. Porsche was the biggest faller on the German index DAX after it tumbled 7.4%, followed by BMW, Mercedes-Benz, and Volkswagen.

US

Just days before the US election, official figures showed that just 12,000 new jobs were added to the US economy in October. The figure is far below the 113,000 that economists expected and the 254,000 recorded in September. The low number may be due to businesses holding back decisions until election uncertainty passed, but it may have dealt a blow to the Democratic Party.

On 6 November, the day after the US election, the US dollar had its best day in four years as it climbed 1.6% against a basket of other countries.

In pre-trading on 6 November, shares in Trump Media & Technology were up almost 36%. Similarly, Elon Musk, who is a supporter of Trump, saw his business Tesla receive a 13% boost in premarket trading.

When the US stock market opened, it reached an all-time high. The S&P 500 index was up 1.9% and the Dow Jones benefited from a 3% bump as investors bet on Trump’s policies stimulating economic growth.

US company Disney also saw a boost on 14 November and share prices hit a six-month high. The value of the business increased by almost 10% thanks to the success of films Inside Out 2 and Deadpool & Wolverine.

Inflation in the US continues to be above the 2% target. In the 12 months to October 2024, inflation was 2.6%, up from the 2.4% recorded in September.

Asia

China responded to the threat of Trump tariffs saying there would be no winners if a trade war began. Instead, ambassador Xie Feng said the US and China should focus on mutually beneficial cooperation to achieve many “great and good things”.

It was good news for China’s economy in October, with an official PMI showing factory activity returned to growth, ending five consecutive months of contraction. On 1 November, the news led to Hang Seng in Hong Kong adding 1% and the Shanghai Composite index rising by 0.4%.

Perhaps surprisingly, Japan’s Nikkei index gained as it waited for the outcome of the US general election on 5 November. The index rose 1.9% as a weaker yen boosted Japanese exporters’ overseas earnings.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Following the stocks and shares that have experienced impressive returns can seem like fun and a way to make the most out of your investments.

Yet, a study indicates that following the crowd and investing in companies that are being hyped in the press or among investors could mean you miss out on growth opportunities from other sources.

Top stocks rarely perform well for two consecutive years\

Research carried out by Schroders looked at the top 10 performing stocks on the US stock market each year.

Interestingly, in 12 of the past 18 years, not a single stock that was in the top 10 also made it into the top 10 in the following year. Of the other six years, in five of them, only a single company managed to maintain its strong position.

Even staying in the top 100 is rare – an average of 15 companies each year managed to be in the top 100 for two consecutive years. The odds of making it back onto the list in a couple of years are similarly low.

You might be surprised to learn that companies that performed well are more likely to be among the worst-performing stocks a year later.

The research noted that a similar trend can be seen in other markets. In the UK, 11 out of 18 years saw the average top 10 performers move to the bottom half of the performance distribution the next year.

So, if you’ve been hearing about how well a particular stock has been performing, automatically investing in it might not be the right thing to do. It could expose you to more investment volatility than is appropriate for you.

There’s also a risk that companies that are hyped might be overvalued.

The Magnificent Seven is a group of influential technology companies – Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta Platforms, and Tesla – on the US stock market that has made impressive gains over the last year. However, Schroders found collectively they are twice as expensive as the rest of the market in terms of a multiple of the next 12 months of earnings.

Some companies will deliver these expectations, but others won’t, and identifying which ones will meet targets can be difficult.

3 investing lessons you can learn from the volatility of the top stocks

1. Don’t fall for hype

It can be tempting to invest in a company that’s experienced impressive growth recently. But the Schroders study highlights how these companies can experience a fall just as much as others, and perhaps more severely.

Chasing the “hot” stocks could result in higher costs and lower returns than if you opted for investments that were consistently delivering average returns.

That’s not to say you should avoid investing in popular stocks. Indeed, many investment funds will hold investments in the Magnificent Seven. What’s important is assessing if it’s the right option for you and focusing on long-term gains, rather than short-term rises.

2. Accept the investment market can be volatile

As the research highlights, volatility is part of investing.

As an investor, accepting this can be difficult – you understandably don’t want to see the value of your investments fall. Yet, for most investors, sticking to their long-term plan, even when markets dip, makes financial sense if you take a long-term view.

Historically, markets have delivered growth when you look at performance over a longer time frame, including after sharp drops like those experienced during the pandemic in 2020.

While returns cannot be guaranteed and past performance is not a reliable indicator of future performance, history suggests holding investments and waiting out volatility may be the right course of action for you.

Volatility is why it’s often recommended that you invest with a minimum time frame of five years. This provides time for the ups and downs of the market to smooth out and, hopefully, deliver investment returns.

3. Ensure your investments are diversified

If you invested in just one company that was in the top 10 performing stocks, the research suggests the value could fall within the next year. However, if you spread your investment across multiple stocks, you could reduce the risk of this happening.

Diversifying your investments means investing in a range of assets, sectors, and geographical locations. When one area of your investments experiences a drop, a rise in another could offset this.

This is how investment funds work. A fund would pool your money with that of other investors and then invest in a wide range of assets in line with the fund’s risk profile. So, if you want to diversify your investments, a fund could be a good solution for you.

Invest in a way that reflects your goals and circumstances

If you have any questions about how to invest in a way that’s appropriate for your goals and circumstances, we’re here to help. We can offer ongoing support to ensure your investments continue to reflect your needs. Please contact us to speak to one of our team.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

As a business owner, the Autumn Budget delivered at the end of October 2024 could affect both your business and personal finances. Read on to discover the key changes you need to be aware of.

2 Budget tax changes that could affect your business’s finances

The good news is that despite speculation that Corporation Tax could rise, this didn’t materialise.

Indeed, the Corporate Tax Roadmap sets out the government’s intention to cap the headline rate of Corporation Tax at 25% for the duration of the current parliament. It also states it will maintain the Small Profits Rate and capital allowances.

However, two key announcements could affect your business’s outgoings.

The national living wage and minimum wage for young people will both rise in April 2025

If you have employees who earn the national living wage, your payroll expenses are likely to rise in April 2025.

From 6 April, the national living wage for employees who are aged 21 and over will increase by 6.7% from £11.44 an hour to £12.21. Younger workers aged under 21 who earn the national minimum wage will also benefit from a pay boost when it rises from £8.60 to £10 an hour.

Employer National Insurance will rise to 15%

Potentially having a larger effect on your business finances are the changes the chancellor unveiled to employer National Insurance (NI).

Effective from 6 April 2025, the employer NI rate will increase by 1.2% from 13.8% to 15%.

In addition, the threshold at which you will pay NI will fall. Under the current rules, employers pay NI on earnings above £9,100 a year. For the 2025/26 tax year, this threshold will fall to £5,000.

So, not only may your business be paying a higher rate of NI, but it will also be paying NI on a larger proportion of employees’ earnings.

On a more positive note, in 2024/25, employers with an NI bill of £100,000 or less may benefit from the Employment Allowance, which provides a £5,000 discount. In 2025/26, the threshold will be removed, so all eligible employers will now benefit, and the discount will rise to £10,500.

As a business owner, there may be steps you can take to reduce the effect the changes will have on your firm’s finances. For example, offering your employees a salary sacrifice scheme could be a useful way to reduce your NI bill and offer a perk that may benefit employees too.

If you’d like to discuss the steps your business could take to improve tax efficiency, please get in touch.

2 Budget announcements that could affect your finances when you leave the business

Moving on from your business might not be part of your plans now, but it may still be important to consider your tax liability if or when you exit later. Understanding your tax position could help you create a tax-efficient exit strategy that suits your needs.

Some Budget announcements could affect your plans, and you may want to review them as a result.

The main rates of Capital Gains Tax have increased

Changes to the main rates of Capital Gains Tax (CGT) were effective immediately after the Budget and affect asset disposals made on or after 30 October 2024.

CGT is a type of tax you pay when you make a profit disposing of certain assets, including when you sell some business assets.

The basic rate of CGT has increased from 10% to 18% and the higher rate went from 20% to 24%.

The government revealed it would maintain the Business Assets Disposal Relief (BADR) – formerly known as “Entrepreneurs’ Relief” – at £1 million. However, the BADR rate of CGT will rise from 10% to 14% on 6 April 2025 and to 18% on 6 April 2026.

As a result, the tax bill you face when selling your business could be higher than you expect.

Changes to reliefs could affect your estate’s Inheritance Tax liability

If you plan to leave your business to a loved one when you pass away, changes to Inheritance Tax (IHT) reliefs could affect your estate’s tax liability.

After 6 April 2026, Agricultural Property Relief will be capped at £1 million and assets that exceed this threshold could be liable for IHT with a 50% relief applied. Business Property Relief will also fall from 100% to 50% in all circumstances for shares designated as “not listed” on the markets of a recognised stock exchange.

There are often steps you can take to reduce a potential IHT bill, but you usually need to be proactive. If you’d like to discuss how you could pass on your business and minimise a potential IHT bill, please get in touch.

Get in touch to understand how the Budget may affect you

If you’d like to talk about how the Budget could affect your finances and those of your business, please get in touch. We can work with you to understand what announcements mean for you and the steps you might take to reduce the effect changes could have.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning or Inheritance Tax planning.

Research suggests the fear of running out of money later in life could be holding back millions of retirees. While spending too much too soon is a risk for some retirees, it could also mean you miss out on the lifestyle or experiences you’ve been looking forward to.

According to a report in MoneyAge, 30% of retirees – the equivalent of 6.4 million people – said spending money makes them anxious. A similar proportion agreed they often don’t spend money on things they need because they’re worried about the future.

Interestingly, a quarter of those questioned said their emotions influence their financial decisions.

In some cases, retirees might need to be mindful of their budget to ensure their assets last their lifetime. Yet, the responses suggest that many retirees are reducing spending based on emotions, rather than a financial review.

Spending too much too soon is a risk many retirees may want to consider

Running out of money later in life may be a concern if you choose to access your pension flexibly or are using other assets to complement a reliable income.

When you use flexi-access drawdown to access your pension, you can adjust the income you receive to suit your needs. This provides you with greater flexibility, which could be useful if your income needs change or you have a one-off expense.

However, you’ll also need to consider how much you can sustainably withdraw from your pension each year. If you take a higher amount in your early years of retirement, it could leave you with a shortfall in the future. In some cases, that could lead to an inability to meet financial commitments or mean that you need to adjust your lifestyle.

So, the concerns raised in the survey are valid ones. Yet, being overly cautious could present a different type of risk too.

You could risk the retirement lifestyle you’ve worked hard to secure, even if you have the assets to achieve it because fear means you’re holding back.

A retirement plan could help you manage financial fears

A bespoke retirement plan could help ease your financial fears when you retire.

As part of creating a retirement plan with your financial planner, you might use a tool known as “cashflow modelling”. This could help you visualise how your wealth and assets might change during your lifetime.

A cashflow model uses information about your current finances and your plans to project how your wealth will change. So, you might want to model whether withdrawing £35,000 a year from your pension could mean you run out of money later in life. Or calculate what would happen if you wanted to withdraw a lump sum to fund a one-off cost, like going on a luxury cruise.

Not only does cashflow modelling help you understand how your retirement plan could affect your finances, but it may also be used to understand the effect of events outside of your control. For example, you might want to understand how your pension would fare if you needed to replace your home’s roof unexpectedly, or how a period of high inflation may affect your long-term finances.

As you can model these scenarios that might be a cause of financial fear, you could find your worries are eased when you realise you’re in a better position than you initially thought. Alternatively, it may highlight a potential gap that you might be able to close as a result.

It’s important to note that the projections from a cashflow model cannot be guaranteed. The data will be dependent on the information provided and will make some assumptions, such as the rate of inflation or expected investment returns.

Yet, cashflow modelling could still be a useful way to understand how the decisions you make might affect your financial security in the future.

One of the challenges of managing your finances in retirement is that it often requires a mindset shift.

During your working life, you might have focused on accumulating wealth. This may have involved contributing to your pension, creating an emergency fund, or investing with the aim of delivering long-term growth. During this period, you might have formed positive money habits that helped you reach your goals.

When you retire, many people switch to decumulating wealth as they use assets to fund their lifestyle. It can be more difficult than you expect to change the habits you’ve formed to suit the next chapter of your life.

So, it’s not just fear you may have to consider when understanding what might be influencing your financial decisions in retirement.

Again, a retirement plan could give you the confidence to start using the assets you’ve accumulated during your life to support the retirement goals you’ve been working towards.

Get in touch to understand your retirement income

If you’d like to understand how to use your pension to create a sustainable income in retirement or how you might use other assets, please get in touch with us. We could work with you to create a tailored retirement plan that considers both your financial situation and your goals.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Subconscious bias can affect your financial decisions. They might mean you make decisions that aren’t right for you. Setting a goal could help reduce the effect bias has. Read on to discover three reasons why.

Cognitive bias is an error in cognition that can happen if your personal beliefs or experiences affect a decision you’re making. So, you might act based on an emotion rather than evidence. In some ways, cognitive bias is useful – it helps you make decisions quickly.

However, there are times when bias is potentially harmful, including when you’re making financial decisions.

Loss aversion is a common type of financial bias that might happen when you’re investing. Loss aversion is a tendency to avoid losses over achieving equivalent gains. The theory suggests that people feel more pain from losses than they feel pleasure from gains.

From an investment perspective, loss aversion could mean you’d prefer to hold your money in cash, even though it could be losing value in real terms once you consider inflation. Or that you choose low-risk investments even when taking greater risks would align with your goals and circumstances.

In these cases, loss aversion could mean missing out on an opportunity to grow your wealth because you’re worried about potential losses.

There are many other types of financial bias, and setting out your goals could help you manage them. Here are three insightful reasons why.

1. A goal could help you understand why certain decisions are right for you

A clearly defined goal can give you a sense of direction and an understanding of why you’re making certain financial decisions.

Having a long-term vision could mean you’re less likely to have a knee-jerk reaction due to emotions or events that are outside of your control. For example, if market volatility means the value of your investments falls, knowing that you’ve invested with a long-term view could help you stick to your plan, even if you’re nervous.

Setting out goals and understanding what’s realistic might remove some other forms of bias too.

Overconfidence bias involves overestimating your skill or knowledge when investing. It could mean you overlook relevant information or feedback because you believe you’re correct. In some cases, investors take more risk than is appropriate for them because they believe they’ll be able to secure higher returns by doing so.

A goal could temper some of the impulsiveness you might experience if you’re overconfident. If you’ve calculated you can secure your goals by achieving average annual investment returns of 4%, you might be less likely to chase potentially higher returns that could result in losses.

2. Setting goals could mean you recognise when emotions are affecting your decisions

Emotions are one of the reasons why people might make financial decisions that aren’t right for them. From feeling fearful during market volatility to being excited when a new opportunity comes along, emotions might mean you don’t take the time to fully assess your options before acting.

Setting a goal can’t remove your emotions, but it might mean you’re more likely to realise when they could be clouding your judgment.

Let’s say you’re talking to a group of friends who are excitedly talking about an investment opportunity that they say will deliver high returns. It can be easy to be swept up in the conversation and invest without carrying out additional research to see if it’s right for you.

However, if you’ve set an investment goal and know what steps you need to take to reach it, you might be less likely to be side-tracked by emotional decisions.

3. A goal could help you form positive money habits

Working towards large goals often requires consistent and repetitive actions. You might regularly contribute to a savings account, pension, or Stocks and Shares ISA.

Taking consistent actions could help you form positive money habits that mean you’re less likely to stray from your financial plan when emotions or other influences occur.

Do you want help setting your financial goals?

If you’d like help setting financial goals and understanding the steps you could take to achieve them, please get in touch. Having an outside perspective looking at your finances could also highlight where financial bias might affect your decisions.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.