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.
We want to talk about your financial future.
This publication has been issued by RBC’s Wealth Management international division in the United Kingdom and the Channel Islands which is comprised of an international network of RBC® companies located in these jurisdictions and includes RBC Europe Limited and Royal Bank of Canada (Channel Islands) Limited. You should carefully read any risk warnings or regulatory disclosures in this publication or in any other literature accompanying this publication or transmitted to you by RBC’s Wealth Management international division.
This publication has been compiled from sources believed to be reliable, but no representation or warranty, express or implied is made to its accuracy, completeness or correctness. All opinions and estimates contained in this report are judgements as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. This report is not an offer to sell or a solicitation of an offer to buy any securities. Past performance is not a guide to future performance, the value of investments and income arising can go down, future returns are not guaranteed, and an investor may not get back the amount originally invested. Countries throughout the world have their own laws regulating the types of securities and other investment products and services which may be offered to their residents, as well as the process for doing so. As a result, any securities or services discussed in this report may not be eligible for sale in some jurisdictions. This report is not, and under no circumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. Nothing in this report constitutes legal, accounting or tax advice or individually tailored investment advice.
This material is prepared for general circulation and does not have regard to the particular circumstances or needs of any specific person who may read it. The investments or services contained in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about the suitability of such investments or services. To the full extent permitted by law none of the entities which comprise the international division of RBC Wealth Management nor any of their affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein. No matter contained in this document may be reproduced or copied by any means without the prior consent of RBC Wealth Management.
Clients of RBC Europe Limited may be entitled to compensation from the UK Financial Services Compensation Scheme (FSCS) if it cannot meet its obligations. This depends on the type of business and the circumstances of the claim. Most types of investment business are covered for up to a total of £85,000. For further information about the compensation provided by the FSCS scheme (including the amounts covered and eligibility to claim) please refer to the FSCS website FSCS.org.uk. Please note only compensation related queries should be directed to the FSCS. Royal Bank of Canada (Channel Islands) Limited is not covered by the UK Financial Services Compensation Scheme.
RBC Europe Limited is registered in England and Wales with company number 995939. Its registered office is 100 Bishopsgate, London EC2N 4AA. RBC Europe Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Royal Bank of Canada (Channel Islands) Limited (“the Bank”) is regulated by the Jersey Financial Services Commission in the conduct of deposit taking, fund services and investment business in Jersey. The Bank’s general terms and conditions are updated from time to time and can be found at https://www.rbcwealthmanagement.com/en-eu/terms-and-conditions. Registered office: Gaspé House, 66-72 Esplanade, St. Helier, Jersey JE2 3QT, Channel Islands. Deposits made with Royal Bank of Canada (Channel Islands) Limited in Jersey are not covered by the UK Financial Services Compensation Scheme. Royal Bank of Canada (Channel Islands) Limited is a participant in the Jersey Bank Depositors Compensation Scheme. The Scheme offers protection for ‘eligible deposits’ up to £50,000 per individual claimant, subject to certain limitations. The maximum total amount of compensation is capped at £100,000,000 in any 5 year period. Full details of the Scheme and banking groups covered are available on the Government of Jersey’s website http://www.gov.je/dcs or on request.
Investment services offered by the Bank are not covered by an investor compensation scheme as there is currently no such scheme operating in Jersey, however ‘eligible deposits’ held pursuant to investment services may be protected under the Bank Depositors Compensation Scheme described above – for more information see the Bank’s general terms and conditions. Some of the products that the Bank might recommend to you could be registered overseas and may be covered by a local compensation scheme. Your investment counsellor will provide you with the details of any overseas compensation schemes (where applicable) at the time of making an investment recommendation.
Copies of the latest audited accounts are available upon request from the registered office. ® / ™ Trademark(s) of Royal Bank of Canada. Used under licence.