Our Wealth Planning team assess the trends set to impact financial decision making in 2025.
Despite UK and U.S. election outcomes and a first Labour Budget in 14 years, the new year feels no more certain when set against the backdrop of escalating geopolitical uncertainty.
As post-election landscapes continue to form throughout 2025, high-net-worth individuals and their families should remain nimble in their approach to their finances, as they look to navigate challenges and capitalise on opportunities.
Here are five topics likely to impact financial decision-making in the year to come.
While stimulating British businesses was a key tenet of the Labour manifesto, many UK business owners are now wrestling with higher wage bills resulting from increases to Employer National Insurance Contributions, a measure announced in the 2024 Autumn Budget .
At the same time, family businesses are being forced to review their succession plans, with a significant reduction in inheritance tax reliefs on shareholdings in privately owned companies set to take effect from April 2026.
On a more positive note, the Treasury reconfirmed an extension to the Enterprise Investment Scheme and venture capital trusts to 2035. This provides investors with a suitable risk profile a tax-efficient way to invest in early-stage British businesses.
“Both of these initiatives can play a significant role in retirement planning, because they offer compelling tax incentives to investors supporting smaller, unquoted UK companies,” says Nick Ritchie, senior director of Wealth Planning at RBC Wealth Management in the British Isles.
The Autumn Budget set out plans to raise £40 billion to support government spending. A key component of this strategy involved an immediate increase in the rates of capital gains tax (CGT). Specifically, the lower rate of CGT has risen from 10 to 18 percent, while the top rate has increased from 20 to 24 percent.
“Many feared the much-signaled increase might have been more significant,” says Ritchie. “In real terms it still represents a 20 percent increase in the tax burden for higher-rate CGT payers.” For individuals seeking to navigate the potential impact of these changes on their financial plans, diversity of wealth-holding structures is important. A change in rules may favour one structure over another, such as individual savings accounts (ISAs), pensions, international bonds, or family corporate structures. A diverse allocation allows for an adaptable plan.
With the planned cap on social care costs being abandoned and personal expenditure rising, clients will be wary about gifting too much too soon. At the same time, without a drastic change to inheritance tax (IHT) thresholds, even those with modest estates are left exposed to significant IHT.
“Parents trying to walk the tightrope of gifting to reduce IHT exposure without sacrificing their own standard of living might look to strategies that achieve this without giving it all away,” says Lucy Day, associate director of Relationship Management for RBC Wealth Management in the British Isles. “We expect insuring the liability and investing in assets that are exempt from IHT to be popular in the coming years.”
Inflation may be easing, but costs remain stubbornly high and fiscal drag on earnings persists (when inflation and earnings growth push more people into higher tax brackets).
“We expect children of high-net-worth individuals to require more support and parents to oblige, with the continuing trend of smaller, more frequent and targeted gifts,” says Ritchie. “Be it helping with a grandchild’s school fees, funding the cost of home improvements or supporting with property purchases, the bank of mum and dad is likely to continue to be busy in 2025.”
The Bank of England is facing more palatable inflation data, albeit with risks lying ahead. This could see a very gradual lowering of interest rates in 2025. This may continue to support risk assets such as equities and bonds, with lower rates encouraging consumer and business spending, investment, and potentially boosting asset prices.
Investors who have remained overweight cash should be wary of the reinvestment risk, as cash deposits roll off in a possible downward-rate environment.
Slightly lower interest rates may also ease the burden on debt holders. “Those who do take on new debt may favour variable rates rather than fixing, while central banks continue to try and control stubborn inflation,” suggests Day.
Those with surplus capital and a shorter time frame to invest may look to low-coupon bonds with shorter-dated maturities. These bonds return investors’ capital more quickly and enable them to take advantage of attractive yields-to-maturity – the percentage rate of return for a bond – on funds earmarked for medium-term spending.
“During times of economic strain, bondholders would do well to pay extra attention to the counterparty strength of the issuer – attractive yields may lure investors in, but let’s not forget return of capital is more important than return on capital,” says Ritchie.
As we move into a new year and trends come and go, remember to review your wealth plans on a regular basis, in case your circumstances, goals or, indeed, regulations or broader global economic factors change.
Please note: RBC is not a tax specialist and this does not constitute tax advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. You should always check the tax implications with an accountant or tax specialist.
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