UK

Tariffs take the limelight: UK share prices fell during March as investors became increasingly jittery about the prospect of a global trade war ahead of an expected swathe of worldwide US trade tariffs scheduled to take place on 2 April. The FTSE 100 Index fell by 2.6% over March, while the FTSE 250 Index dropped by 4.2%.

BoE warns on tariffs: Appearing in front of the Treasury Select Committee during the month, Governor of the Bank of England (BoE) Andrew Bailey  warned that the risks posed by tariffs to the UK and world economy are “substantial” and could result in UK consumers having less money in their pockets. The BoE left its key base rate unchanged at 4.5% at its March meeting. The BoE said that uncertainty over global trade policy had “intensified” and also highlighted an increase in the number of firms pausing or freezing hiring plans ahead of April’s increase in employers’ National Insurance contributions (NICs).

Lower economic growth: having expanded by 0.4% in December, the UK economy shrank by 0.1% in January, primarily due to a decline in manufacturing activity. The Organisation for Economic Cooperation & Development downgraded its UK growth forecast from 1.7% to 1.4% in 2025, and from 1.3% to 1.2% in 2026. Elsewhere, the British Chambers of Commerce cut its growth forecast for the UK this year from 1.3% to 0.9%, citing “severe pressures piling up on businesses right now”, including the “double whammy” of higher taxes and a potential global trade war.

Spring Statement: the Chancellor of the Exchequer’s Spring Statement included additional cuts to welfare spending and an increase to defence spending. The economic growth forecast for this year was halved from 2% to 1% and the Office for Budget Responsibility raised its 2025 inflation forecast to 3.2%. Inflation is expected to reach its 2% target in 2027. The government’s budget deficit3 will be £36.1 billion in 2025-26, falling to £13.4 billion in 2026-27 and reaching a surplus of £9.9 billion by 2029-30.

Inflationary pressures set to build? The annualised rate of consumer price inflation fell from 3% in January to 2.8% in February, dampened in part by lower prices for clothing and footwear. Looking ahead, however, the cost of living is set to rise from April against a backdrop of higher household bills and an increase in employers’ NICs.

Global

Market turmoil: the trade wars waged by US President Donald Trump continued in March amid fresh announcements of levies on imports including cars and car parts, and steel and aluminium. President Trump warned of sweeping “reciprocal” tariffs to be announced on 2 April – ‘Liberation Day’. Global markets generally fell heavily in March amid fears of a worldwide trade war that could stoke inflation, hit corporate profits, and possibly lead to a US recession. The Dow Jones Industrial Average Index fell by 4.2% over the month, while the Nasdaq Index dropped by 8.2%; meanwhile, the price of gold – often regarded as a safe haven during periods of uncertainty – reached a fresh all-time high.

“Further fragmentation of the global economy is a key concern” said the Organisation for Economic Cooperation & Development (OECD), which revised down its US growth forecast from 2.4% to 2.2% this year, and from 2.1% to 1.6% next year. The OECD slashed its growth forecast for Canada this year from 2% to just 0.7% and predicted that Mexico’s economy would fall into recession. Germany’s 2025 forecast was downgraded from 0.7% to 0.4%, while France was trimmed from 0.9% to 0.8%.

ECB cuts rates again: against a backdrop of mounting uncertainty about the US, European equities performed relatively well in March, buoyed by plans to ramp up defence spending and another cut in the eurozone’s key interest rate. The European Central Bank (ECB) cut rates  by 25 basis points to 2.5%, but downgraded its economic growth forecasts for the euro area, which is now expected to grow by 0.9% this year and 1.2% next year, citing “lower exports and ongoing weakness in investment, in part originating from high trade policy uncertainty”. The Dax Index fell by a comparatively muted 1.7% over the month.

China bucks the trend: the Bank of Japan maintained its key interest rate at 0.5% in March and highlighted “high uncertainties … including the evolving situation regarding trade.” The Nikkei 225 Index fell by 4.1%. Elsewhere in the region, China set a growth target of “around 5%” for its economy this year and, in the face of an intensifying trade war, pledged to make domestic demand the “main engine and anchor” of economic growth. The Shanghai Composite Index bucked the global trend during March, rising by 0.4%.

As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344  or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.

UK

FTSE 100 Index hits record high: mounting hopes of lower interest rates, alongside weaker sterling, rising oil prices, and renewed interest in non-technology stocks, propelled the FTSE 100 Index to new highs during January. The blue chip index rose by 6.1% over the month, while the FTSE 250 Index climbed by 1.6%.

Muted economic growth: the UK economy expanded by only 0.1% during November, posting its first month-on-month growth since August. Over the three months to November, the economy is estimated to have stagnated. Nevertheless, UK growth is set to outperform Germany, France, and Italy this year and next, according to the International Monetary Fund, which raised its 2025 UK growth forecast from 1.5% to 1.6% and maintained its 2026 forecast at 1.5%.

Inflation cools: consumer price inflation fell from 2.6% to 2.5% year on year in December, representing the first decline since September. Core inflation also eased, falling from 3.5% to 3.2% and boosting hopes for a cut in interest rates at the Monetary Policy Committee’s February meeting. The data reduced pressure on bond yields, which had risen earlier in the month amid concerns that impending US tariffs could push up inflation. 

Gloomy outlook for businesses and consumers: the Confederation of British Industry warned of “widespread” pessimism across the UK’s private sector, with many companies expecting “a significant fall in activity” exacerbated by lacklustre demand and cautious consumers. Meanwhile, GfK reported that UK consumer confidence had fallen to its lowest level in more than a year during January and warned of “dark days ahead.”

2024 profit warnings: 18.8% of UK-listed companies issued a profit warning in 2024, according to a quarterly survey by EY Parthenon, representing the third-highest total in 25 years. 34% of those companies cited contract and order cancellations or delays. The sectors with the most warnings included industrial support services, software and computer services, and retailers.

Mining sector curbs 2024 dividend payouts: UK dividends rose at a headline rate of 2.3% to reach during 2024, boosted by special dividend payments, according to Computershare’s Dividend Monitor. On an underlying basis, however, they fell by 0.4% during the year, dampened by dividend cuts in the mining sector. Looking ahead, Computershare expects dividends to rise at a headline rate of 0.7% to £92.7 billion in 2025.

Global

Trump takes office: US markets rose following Donald Trump’s inauguration, as the 47th US President began to issue a raft of executive orders. However, the technology sector dipped sharply as the release of DeepSeek, a Chinese AI app, triggered concerns over the long-term prospects of more established players. Nvidia’s share price fell by almost 17% in one day, although it had rallied to some extent by the end of the month. The Dow Jones Industrial Average Index rose by 4.7% over January as a whole, while the Nasdaq Index rose by 1.6%.

Tariff announcements: following his inauguration, President Trump announced tariffs of 25% on imports from Canada and Mexico, and a levy of 10% on goods from China. The news raised concerns about the prospect of renewed inflationary pressures that were calmed to some extent by a subsequent delay to the levies on Canada and Mexico. President Trump is also expected to impose tariffs on imports from the EU. At the World Economic Forum in Davos, China’s vice-premier Ding Xuexiang said: “Protectionism leads nowhere. Trade war has no winners.”

Fed maintains rates … policymakers at the Federal Reserve (Fed) left the key federal funds interest rate unchanged at 4.25% to 4.5%. The decision had been widely anticipated, but President Trump responded by criticising the central bank’s response to inflation.

… the ECB cuts … as expected, the European Central Bank (ECB) cut its key interest rate by 25 basis points to 2.75%. The eurozone’s rate of inflation rose from 2.2% to 2.4% in December, reaching its highest level since July; nevertheless, further cuts are widely expected. Economic growth in the eurozone stagnated during the final quarter of 2024; having contracted by 0.3% during 2023, Germany’s economy shrank for a second consecutive year in 2024, contracting by 0.2%. Nevertheless, the Dax Index rose by 9.2% over January and hit a new high, boosted by optimism over the prospect of further monetary easing.

…. and Japan tightens: the Bank of Japan (BoJ) raised its key interest rate by about 25 basis points to “around 0.5%” in January. Rates are now at their highest level since 2008, with further increases expected. The BoJ said it would “continue to raise the policy interest rate and adjust the degree of monetary accommodation.” The Nikkei 225 Index fell by 0.8% in January.

As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344  or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.

UK

Cautious Bank of England: the FTSE 100 Index ended 2024 in positive territory, rising by 5.7% over the year to notch up a fourth consecutive year of positive gains. However, the blue-chip index fell by 1.4% over December; investor sentiment was dampened by a cautious Bank of England (BoE), which now expects zero economic growth in the final three months of the year. The insurance sector came into focus during the month following the news that FTSE 100 index constituent Aviva had agreed to buy mid-cap stock Direct Line in a deal worth £3.7 billion. The FTSE 250 Index fell by 0.7% in December but rose by 4.7% over the year. Elsewhere, the yield on the benchmark UK government bond rose from 3.54% at the end of 2023 to end 2024 at 4.57%.

Tighter for longer? Persistent inflationary pressures stoked expectations that interest rates are likely to fall more slowly than previously hoped. During December, the BoE kept its key interest rate at 4.75% following the news that the annualised rate of consumer price inflation had risen for a second consecutive month from 2.3% to 2.6%, reaching its highest rate since March. Core inflation climbed from 3.3% to 3.5%, while inflation in the services sector remained at 5%. The Organisation for Economic Cooperation & Development (OECD) warned that UK monetary policy is likely to remain “tighter for longer” because of some of the measures in the October Budget and predicted that rates will fall to 3.5% by early 2026.

Lacklustre growth: the UK economy stagnated during the third quarter of 2024, according to the Office for National Statistics, which revised down an earlier growth estimate of 0.1%. The economy shrank by 0.1% in October, following a contraction of 0.1% in September. The British Chambers of Commerce (BCC) downgraded its 2024 growth forecast for the UK from 1.1% to 0.8% but raised its 2025 forecast from 1% to 1.3%. The BCC expects inflation to remain above its 2% target until the end of 2026 and warned that businesses face the prospect of navigating rising cost pressures alongside higher employers’ National Insurance contributions. According to GfK’s Consumer Confidence Index, confidence picked up slightly in December following a post-Budget dip, as UK consumers became more sanguine about the prospects for their personal finances. However, the index remained firmly in negative territory overall.

Global

A strong 2024 for the US: although the Dow Jones Industrial Average Index (DJIA)  fell by 5.3% in December, dampened by uncertainty over the pace of future rate cuts, it rose by 12.9% over 2024, underpinned by a resilient domestic economy, lower interest rates, and hopes of deregulation and lower taxes under the impending Trump administration. Meanwhile, the technology-rich Nasdaq Index breached 20,000 points for the first time during December, driven up by leading technology stocks including Nvidia, which rose by more than 171% over 2024.

Rate cuts in US and Europe: the Federal Reserve (Fed) cut interest rates by 25 basis points in December, following earlier cuts in September and November, taking the key federal funds rate to a range of 4.25% to 4.5%. The rate of consumer price inflation rose from 2.6% to 2.7% in November and Fed Chair Jerome Powell commented: “From this point forward, it’s appropriate to move cautiously and look for progress on inflation.” The European Central Bank (ECB) also cut interest rates in December, reducing its deposit rate by 25 basis points to 3%. News of the cut pushed the pound to its highest level against the euro since the Brexit vote in 2016. ECB President Christine Lagarde stoked expectations of further cuts to come, saying: “The direction of travel is clear, and we expect to lower rates further.”

Lacklustre outlook for Germany: Germany’s economy is predicted to struggle this year: the Bundesbank warned that the global rise in protectionism is set to be a key source of uncertainty. Germany’s Dax Index rose by 1.4% in December and increased by 18.8% over the year, boosted by a strong contribution from its largest constituent, software company SAP. In France, however, the CAC 40 Index rose by 2% in December but declined by 2.2% over 2024, reflecting the country’s recent political upheaval.

Uncertainty in Japan: policymakers at the Bank of Japan (BoJ) voted by eight to one to leave its key interest rate unchanged at 0.25%. In a speech during December, BoJ Governor Kazuo Ueda warned of “high uncertainties surrounding future developments” in the US and elsewhere, citing the potential economic impact of the incoming Trump administration. The Nikkei Index rose by 4.4% in December and by 19.2% over 2024.

As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344  or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.

UK

Power plays: politics – including the US election and the ongoing fallout from October’s Budget – absorbed much of the limelight in the UK during November. The Bank of England (BoE) warned of mounting risks to the UK’s financial system, including geopolitical instability, pressure on government debt levels, and the prospect of trade wars. Nevertheless, UK equity indices rose over the month, partly boosted by corporate activity in the insurance sector. The FTSE 100 Index rose by 2.2%, while the FTSE 250 Index climbed by 1.9%.

Budget fallout: following a dip in October that was widely attributed to Budget-related uncertainty, consumer confidence strengthened in November, according to GfK. However, there are concerns that some of the measures in the Budget – including the increase in employers’ National Insurance contributions – could be undermining business sentiment. The Confederation of British Industry reported that almost two-thirds of UK companies that responded to its post-Budget survey believe the Budget will damage UK investment. Meanwhile, 82 UK retailers, alongside the British Retail Consortium, sent a letter to Chancellor Rachel Reeves warning that the “cumulative burden” of measures contained in October’s Budget will lead to higher prices, “inevitable” job losses, and shop closures.

Pension reforms: in the annual Mansion House speech, Rachel Reeves announced plans for major pension reforms. These focus on consolidating 86 Local Government Pension Schemes into eight “megafunds” in a move designed to boost for UK investment and deliver better outcomes for savers.

Inflation ticks up: as expected, BoE policymakers cut the base rate from 5% to 4.75% but warned that measures in the Budget were likely to stoke inflationary pressures. Higher energy prices pushed the annualised rate of inflation from 1.7% in September to 2.3% in October, reaching its highest level since April and dampening hopes of another imminent rate cut. Inflation in the services sector increased to 5% and core inflation rose from 3.2% to 3.3%.

Lacklustre growth: having expanded by 0.5% during the second quarter of 2024, the UK economy grew by only 0.1% in the third quarter as activity in the services sector lost pace against a backdrop of uncertainty ahead of the Budget. The rate of unemployment rose to 4.3% in the third quarter, and vacancies continued to fall. Average earnings (excluding bonuses) rose at an annualised rate of 4.8% during the period, representing their slowest growth since mid-2022.

Global

Politics dominate: news flow and sentiment in November were dominated by the US election and its outcome, as Donald Trump’s victory stoked expectations of deregulation, tax cuts, and fresh tariffs. While US markets rose to new all-time highs, the result also triggered speculation that his policies could fuel inflation and reduce the Federal Reserve’s (Fed’s) scope to cut interest rates. Over November, the Dow Jones Industrial Average Index rose by 7.5%, notching up seven new closing highs during the month, while the S&P 500 breached 6,000 points for the first time. The Fed cut its key interest rate by 25 basis points to a range of 4.5% to 5% early in November and Fed Chair Jerome Powell indicated that the Fed is likely to take a gradual approach to monetary easing.

New tariffs: towards the end of November, President-elect Trump announced that he intends to impose new tariffs on China, Canada and Mexico from the first day of his new administration, triggering concerns over the prospect of trade wars and possible supply chain disruptions. Trump also intends to impose tariffs of 10% to 20% on the rest of the world. The European Central Bank (ECB) warned that concerns over the outlook for global trade had added to geopolitical uncertainty; ECB President Christine Lagarde commented that an all-out trade war would be a “net negative for all”.

Above-target inflation in the eurozone: the rate of inflation in the eurozone rose from 2% year on year in October to 2.3% in November; however, the core inflation rate remained steady at 2.7% for a third consecutive month. Sentiment in Europe was also affected by political uncertainties amid the collapse of Germany’s governing coalition and concerns over the ability of France’s minority coalition to push through its budget. After a volatile month, the Dax Index ended November 2.9% higher, while the CAC 40 Index fell by 1.6%.

BoJ set to tighten again? Alongside the possible impact of Trump’s planned tariffs, inflationary pressures in Japan reinforced speculation that the Bank of Japan (BoJ) will implement another rate increase. Although the annualised rate of consumer price inflation moderated from 2.5% in September to 2.3% in October, it remained above the BoJ’s 2% target; meanwhile, services producer price inflation rose from 2.8% to 2.9% year on year. The Nikkei 225 Index fell by 2.2% over the month.

As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344  or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.

Pensions and Inheritance Tax

You may have read about the budget on 30^th October and one of the biggest announcements which was undoubtedly the proposal to include pensions in estates for Inheritance Tax (IHT) from April 2027. We are writing to you now to urge that you take no action in respect of this for the immediate future for the reasons set out below.

The main reason for this is that the planned changes are for the moment at the proposal stage and may be varied, potentially significantly before they become law. There is currently a consultation which is open until 22^nd January 2025 for interested parties to provide their views on the detailed regulations required to implement these changes. Following this consultation, it is expected that the draft legislation will be issued in the second half of 2025 and is expected to come into effect in April 2027.

Therefore, the current legislation will remain in place until April 2027. Thus, there is no need to make any immediate decisions concerning your pension, and we would recommend not making any changes at least until the draft legislation is confirmed later in 2025 as the current rules will remain until April 2027.

It is clear from the wording in the consultation paper that the Government and HMRC want pensions to be used for retirement income rather than as wealth protection plans. “In recent years, pension schemes have been increasingly used and marketed as a tax planning tool to transfer wealth without an Inheritance Tax charge, rather than for their intended purpose of funding retirement.” It should be noted that when the pension rules changed in 2015, known as Pensions Freedoms, this was the first time that this type of financial planning was allowed.

The planned changes would mean that from 6^th April 2027 most unused pension funds and death benefits would be included within the value of a person’s estate for Inheritance Tax purposes. In effect, most monies that are in a pension fund at the date of death, would be treated as being part of that person’s estate and may be liable to IHT.

We will of course keep you informed and, once the legislation is drafted, we will be better placed to provide planning advice to you in this regard. However, and to reiterate, at this time we would not recommend taking any action whilst these are still proposals not planned to be implemented until April 2027. Until that time all the current rules are still in place, meaning most pensions are outside of IHT.

If you do have any immediate concerns about the proposed changes, please do not hesitate to contact your adviser, who will be happy to talk these through with you.

UK

Autumn Budget: in Labour’s first Budget since 2010, Chancellor of the Exchequer Rachel Reeves unveiled what the Office for Budget Responsibility (OBR) described as “a large, sustained increase in spending, taxation, and borrowing”, including £40 billion-worth of higher taxes alongside increased investment1 in health, education, defence, housing, and infrastructure. The rate of employers’ national insurance contributions was increased from 13.8% to 15%; meanwhile, the lower rate of capital gains tax was raised from 10% to 18%, and the higher rate was raised from 20% to 24%. Inherited pension pots will be liable to IHT from April 2027. Income tax thresholds will remain frozen until 2028-29.

Budget reaction: the OBR warned that the Budget represented "one of the largest fiscal loosenings of any fiscal event in recent decades". As investors digested the Budget’s potential impact, the yield on the UK benchmark gilt rose to a 12-month high, the pound weakened against the US dollar, and sentiment towards medium-sized and smaller companies waned. Over October as a whole, the FTSE 100 Index fell by 1.5%, while the FTSE 250 Index declined by 3.2%.

Inflation eases: the annualised rate of consumer price inflation moderated from 2.2% to 1.7% during September, reaching its lowest level since April 2021. In an interview with The Guardian, Bank of England (BoE) Governor Andrew Bailey suggested that the central bank could be a “bit more aggressive” in cutting interest rates. Elsewhere, according to a survey undertaken by the BoE, concerns over geopolitical risks have reached record levels among UK market participants, with 93% identifying geopolitics as the principal threat to the UK financial system. 

UK growth set to pick up? The International Monetary Fund expects economic growth in the UK to “accelerate,” raising its forecast for 2024 from 0.7% to 1.1% as lower inflation and interest rates “stimulate domestic demand”. The UK economy grew by 0.2% during August following no growth in July or June. Growth was boosted by output in the manufacturing and construction sectors. 

Dividend growth falls: according to Computershare’s Quarterly Dividend Monitor, headline dividends from UK listed companies fell by 8.1% to £25.6 billion during the third quarter, dampened by cuts in the mining sector, a strong pound, and lower one-off special dividends. On an underlying basis, dividends fell by 3.5% to £25.3 billion.

Global

US election nerves: uncertainty ahead of the US Presidential election weighed on share prices in the US and around the world during October. Major equity markets were choppy but generally fell over the month, although Japan bucked the trend, boosted by yen weakness.

Inflation under control? “The global battle against inflation has largely been won,” according to the International Monetary Fund (IMF), which upgraded its 2024 growth forecast for the US from 2.6% to 2.8%. France is tipped to expand by 1.1%, while Germany is set to stagnate. The IMF also warned that investors are too complacent about risks posed by possible geopolitical shocks to asset prices.

Growth in US: having grown by 3% year on year during the second quarter of 2024, the US economy expanded at an annualised rate of 2.8% during the third quarter, boosted by stronger consumer and government spending. Minutes from the FOMC’s September meeting showed that most policymakers were in favour of the 50 basis point cut but emphasised that the decision should not be construed as “evidence of a less favourable economic outlook”. Further monetary easing is widely expected; nevertheless, Fed officials appear to support a measured series of cuts in future. Although the Dow Jones Industrial Average Index hit seven new closing highs during October, it ended the month 1.3% lower.

ECB remains vigilant: the European Central Bank (ECB) cut its key interest rate by 25 basis points during October. ECB policymakers expect inflationary pressures to pick up in the coming months and then to ease in 2025. The annualised rate of inflation in the eurozone rose to 2% during October compared with September’s rate of 1.7%, dampening hopes of speedy monetary easing. Elsewhere, the eurozone’s economy expanded by 0.4% during the third quarter. Germany sidestepped recession, posting economic growth of 0.2% following its 0.3% contraction in the second quarter, and the Dax Index fell by 1.3% over the month.

Political upheaval in Japan: during October, the coalition led by Japan’s Prime Minister, Shigeru Ishiba, lost its majority. Although the ensuing uncertainty may undermine optimism in the longer term, investors welcomed a weaker yen and the possibility of slower monetary tightening. Despite political upheaval, Japanese equity indices ended October higher as the weaker yen boosted sentiment towards large exporting companies. The Nikkei 225 Index rose by 3.1% over the month.

As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344  or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.

Before Rachel Reeves, the first woman Chancellor stood up on 30 October 2024 to deliver the first Labour Budget for 14 years, we were all warned that there was a “black hole” in the public finances and difficult decisions would need to be made. There were many rumours swirling around and so many leaks that the Speaker became angry with the announcements being made before they were raised in Parliament. There were a few surprises but most of the big news stories had been leaked. In many ways, particularly from a Pensions perspective, the Budget can probably be deemed to be not as bad as feared.

Pensions

There were many rumours prior to the budget regarding restrictions on tax free cash sums and on relief granted on pension contributions. However, the actual position is:

Annual Allowance

The annual allowance is the maximum amount of contribution that you can receive tax relief on in any given tax year. With effect from the 2023/24 tax year this rose to £60,000 from £40,000 and no changes to this have been introduced. Similarly, the ability to use carry forward so that relief not used in the previous 3 tax years can be utilised will continue.

Tax free cash sum

The Budget did not introduce any changes to the rules regarding the amount that can be taken from pension arrangements in the form of a tax-free cash sum. Those who have started the process to withdraw their tax-free cash sum due to the rumours this could be restricted in future may wish to review their decision if the process has not been completed (but if it has been completed then this cannot be undone).

Tax Relief on Pension Contributions

The rumoured demise of tax relief at an individual’s highest marginal rate did not feature so the position remains as before the budget. This means that the tax planning opportunities for those earning between £100,000 and £125,140 remain as relief is effectively at 60% as for earnings between these limits you lose £1 of personal allowance for every £2 of income earned. Similarly for those eligible for Child Benefit there is a similar consideration when earnings are between £60,000 and £80,000. The potential for High Income Child Benefit Charge (HICBC) to be based on household income has been scrapped. Employed individuals will however be able to pay their HICBC through their tax code from 2025.

Pension Funds and Inheritance Tax

The big change for Pension arrangements is that going forward, any funds remaining in pension arrangements at death will form part of the estate for Inheritance Tax purposes. Currently as long as the death benefits are distributed at the discretion of the Trustees, the payment can be made without the delays of probate and without forming part of the individual’s estate. The ability to use pension funds as part of intergenerational wealth transfer will be severely impacted by this.

The intention is for there to be a new HMRC tool which will help work out how the nil rate band is distributed between the deceased’s assets. There is a consultation running until 22 January 2025 regarding the details of how this will all work in practice and the changes will not come into force until 6 April 2027. It seems inevitable that the role of Executors will become rather more complex as a result of these changes and a need for the processes to be streamlined if everything is to be achieved within 6 months of death.

State Pension

No change has been made regarding the triple lock so State Pension will continue to increase by the higher of inflation measured by CPI, average increase in wages or 2.5%. Currently there are also no changes to the already in place provisions for increasing State Pension age which is now 66 for men and women born between 6 October 1954 and 5 April 1960 and then for those born later gradually increasing to age 67 by 2028 and 68 by 2046.

Overall, with all the pension changes and the freezing of allowances, many will need to review their retirement planning to take advantage of the tax reliefs available in respect of pension funding. For those whose only income is the State Pension it remains to be seen what is proposed as with State Pensions increasing and income tax thresholds frozen, in theory the State Pension will become taxable, but this would create significant administration for little gain.

Transferring Pensions overseas

When the Lifetime Allowance was abolished an Overseas Transfer Allowance was introduced. Any payments above this limit were subject to an Overseas Transfer Charge (OTC). If the funds were transferred to a QROPS inside the EEA and Gibraltar, but the member remained a UK resident, there was an exemption from this charge. With effect from 30 October 2024, this exemption no longer applies so any transfer will be subject to 25% OTC on the total amount transferred

ISAs

There are no changes to the current subscription limits, so these remain £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs. These levels are to remain fixed until 5 April 2030.

A rumoured cap on accumulated ISA funds did not materialise.

Income Tax thresholds

The Autumn 2022 budget introduced the freezing of the personal allowance and higher rate tax thresholds at £12,570 and £50,270 until 5 April 2028 with the 45% Additional Rate applying on income above £125,140. Despite the rumours that the period for this freeze would be extended, instead the Chancellor stated that the thresholds would rise in line with CPI once again when the freeze ends.

Savings Allowance and Capital Gains tax

The Personal Savings allowance will be maintained at current levels so £1,000 for those with adjusted net income of £50,270 and below, £500 for those with adjusted net income between £50,270 and £125,140, and drop to £0 for those with adjusted net income over £125,140. The nil rate for dividend income will remain at £500.

As expected, the rates of Capital Gains tax have increased with effect from 30 October 2024. For basic rate taxpayers it will rise from 10% to 18% and for higher and additional rate taxpayers will rise from 20% to 24%. This means the rates are now in line with the rates which apply to residential property which remain unchanged.

Business Asset Disposal Relief

This relief provides a special rate of Capital Gains Tax on the disposal of business assets. A lifetime cap of £1,000,000 is to be applied. The special rate is currently 10% but this will rise to 14% from 6 April 2025 and to 18% from 6 April 2026.

Inheritance Tax

This budget made no changes to the thresholds for Inheritance Tax (IHT) so these remain at current levels, but these levels will now be frozen until 5 April 2030. The nil rate band will remain at £325,000 with the residential nil rate band remaining at £175,000. The nil rate band has remained the same since the 2009/10 tax year so has reduced significantly in real terms. This was once deemed as a tax that only applied to the wealthy, but more and more people are being drawn into the IHT net. This will be even more the case going forward as accumulated funds in pension arrangements are included in assets taken into account.

Agricultural Property Relief and Business Property Relief

The budget has introduced a restriction on the relief available although this change will not take effect until 6 April 2026. After this date only the first £1 million of the combined value of agricultural and business property will receive 100% relief. Any qualifying assets over this value will receive 50% relief so currently a tax charge of 20% rather than 40%.

These reliefs will also apply to shares not listed on recognised stock market but investments in AIM listed shares will qualify for 100% relief up to 6 April 2026 but only 50% relief thereafter.

Tax for non-UK domiciles

With effect from 6 April 2025, the concept of domicile will disappear for tax purposes and the focus will be on residence. Individuals who become UK resident, having been non-resident for more than 10 years will not pay UK tax on foreign income and gains for the first four years of UK residence, but will pay UK tax on their UK income and gains in the usual way.

From 6 April 2025, IHT will apply on worldwide assets when someone is deemed to be a long-term resident, which typically means they have been resident in the UK for more than 10 years out of the last 20 years. Someone leaving the UK will remain subject to IHT for the 10 years after leaving.

Corporation Tax

The Chancellor has committed to keeping the current rates of Corporation Tax and following the budget the Government has published a Corporation Tax Roadmap. This has committed them to

• Cap the Corporation Tax Rate at 25%
• Maintain the Small Profits Rate (19%) and marginal relief at current rates and thresholds
• Maintain key features such as Annual Investment Allowance and Research and Development relief rates

Employers National Insurance Contribution

The change to Employer National Insurance contributions was not a surprise as this had been widely commented on before the Budget speech. This represents the biggest contributor in terms of additional revenue raised and a significant additional cost on Employers.

The Employer National Insurance contribution rate has increased from 13.8% to 15% but in addition the Secondary Threshold, which marks the level of salary when this starts to be paid has been reduced from £9,100 to £5,000.

Changes have also been made to the Employment Allowance which enabled employers with a total National Insurance bill of £100,000 or less to deduct £5,000 from their NI bill. With effect from 6th April 2025 the allowance has been increased to £10,500.

It is anticipated that these amendments will raise £25 billion although concerns have been expressed that it will be less than this as employers may seek to reduce their workforce and going forward put off pay increases or offer lower pay increases. With employers looking at various ways to offset these additional costs, those who currently pass on some of the NI savings when pension contributions are paid by way of salary exchange may consider retaining all of their savings or may look at savings on other employee benefits.

At least the rumour that NI contributions would also be levied on employer pension contributions turned out to be false.

The pension industry was keen to see increases in the required contributions to workplace pension arrangements as it is widely acknowledged that the current 8% in total contributions is not sufficient to generate good retirement benefits. But it is now considered unlikely that there will be any increase in employer contributions for a while.

Increase in National Minimum Wage

An increase in the National Living Wage of 6.7% with effect from 6 April 2025 from the current level of £11.44 per hour to £12.21 per hour was announced which will place further pressure on some employers.

Child Trust Funds

A Child Trust Fund is a long-term tax-free savings account for children born between 1 September 2002 and 2 January 2011 which then closed. However, up to £9,000 a year can be added to an existing account and it was confirmed that this level of subscription can be maintained up to 5 April 2030.

Stamp Duty Land Tax

With effect from 31 October 2024, the Higher Rates for Additional Dwellings surcharge on Stamp Duty Land Tax (SDLT) will rise from 3% to 5%. The single rate of SDLT charged on the purchase of dwellings costing more than £500,000 by corporate bodies has also increased from 15% to 17%. This represents an increase in tax for those purchasing second homes, but to let residential properties and companies buying residential properties

EIS and VCT

The favourable income tax and capital gains tax that applies to these schemes has been extended to 6 April 2035.

Tax Administration

The move to making tax digital will continue with this being extended to sole traders and landlords with income over £20,000 although the precise timing of this is yet to be confirmed. Late payment interest on unpaid tax liabilities will rise from 7.5% to 9% with effect from 6 April 2025. The reporting of P11d benefits via payroll software will become mandatory from April 2026.

Overall, a budget that has delivered significant tax increases, although in some areas not as bad as was feared, but also a significant increase in spending such that despite the additional tax revenue, borrowing will also increase. Indeed, the Office of Budget Responsibility has stated that “this budget delivers a large, sustained increase in spending taxation and borrowing”.

It should be noted that none of the budget changes are law until the Finance Act receives Royal Assent.

Robert J Young

Director & Consulting Actuary                                                                                         October 2024

UK

Politics hit sentiment: concerns over the possible measures contained in the new Labour Government’s Autumn Budget – which is scheduled to take place on 30 October – undermined sentiment in the UK during September, with investors, consumers and businesses all showing signs of unease. In particular, the British Retail Consortium warned that UK consumer sentiment had deteriorated, commenting: “Negative publicity surrounding the state of the UK’s finances appears to have damaged confidence in the economic outlook, particularly among older generations.” Over September as a whole, the FTSE 100 Index fell by 1.7% while the FTSE 250 Index edged 0.2% lower.

Inflation set to pick up: as expected, the Bank of England (BoE) maintained its key base rate at 5% at the Monetary Policy Committee’s September meeting. Sterling strengthened following the central bank’s decision, reaching its highest level against the US dollar since early 2022. The annualised rate of consumer price inflation remained at 2.2% during August. Looking ahead, the British Chambers of Commerce (BCC) expects inflationary pressures to intensify over the rest of 2024, forcing the BoE to adopt a cautious approach and implement a series of rate cuts of 10 basis points each. The BCC warned that the UK economy is “unlikely to be heading into the fast lane any time soon.”

OECD upgrades its expectations for the UK: the Organisation for Economic Cooperation & Development (OECD) upgraded its forecast for UK economic growth from 0.7% to 1.1% this year, and from 0.25 to 1.2% next year. The OECD also expects inflationary pressures to pick up, predicting that the UK will see rates of 2.7% this year and 2.4% in 2025. Elsewhere, the ONS reported that the UK economy had expanded more slowly than first estimated during the second quarter of 2024, posting growth of 0.5% instead of 0.6%. Activity in the production and construction sectors proved weaker than initially calculated. The rate of unemployment fell from 4.2% to 4.1% over the three months to July, and average earnings (excluding bonuses) rose by 5.1% over the same period, reaching their lowest growth rate since the second quarter of 2022.

FTSE movers: in the quarterly review of FTSE UK index components, insurer Hiscox joined the FTSE 100 Index during the month, replacing Burberry Group. Among mid-caps, technology company Raspberry Pi was promoted to the FTSE 250 Index, displacing Diversified Energy Company.

Global

US markets reach fresh highs: equity markets dipped early in September, dragged lower by concerns about the outlook for the US economy that were compounded by disappointing employment data and sharp dips in technology share prices, including Nvidia. By the end of the month, however, US equity indices had reached new highs, boosted by a much-trailed cut in interest rates, while Chinese equities surged following stimulus measures, and Japanese share prices slumped amid expectations of a tighter monetary backdrop.

Fed cuts by 50 basis points: the Federal Reserve (Fed) implemented its first cut in interest rates for over four years1 during September, reducing the federal funds rate1 by a half a percentage point to a range of 4.75% to 5%. Inflationary pressures continued to ease in the US: the annualised rate of consumer price inflation fell to 2.5% in August, representing the lowest 12-month growth since February 2021. In a statement, the Fed confirmed that it had “greater confidence that inflation is moving sustainably towards 2%”. The Dow Jones Industrial Average Index rose by 1.8% in September and registered seven new closing highs during the month, taking the total so far this year to 33.

ECB expected to cut again: business sentiment in Germany declined for a fourth consecutive month during September, according to the Ifo Institute’s Business Climate Index, with the manufacturing index falling to its lowest level since July 2020. Meanwhile, European Central Bank President Christine Lagarde stoked expectations of another cut in eurozone interest rates when policymakers meet in October, commenting that recent developments had strengthened the central bank’s confidence that inflation will return to target in a timely manner. Nevertheless, she acknowledged that Europe’s economic recovery continues to face headwinds. Over September, the Dax Index rose by 2.2%.

China surges: in a bid to boost China’s faltering economy, the country’s government set out measures to improve consumption, while the People’s Bank of China announced a package designed to support China’s real estate sector. The news sent Chinese share prices soaring, and the Shanghai Composite Index jumped by 17.4% over the month. In contrast, Japanese share prices dropped at the end of the month over concerns that incoming Prime Minister Shigeru Ishiba would support a policy of higher interest rates. The Nikkei 225 Index fell by 1.9% over September.

As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344  or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.

UK

UK share prices fall during August: although many global equity markets successfully rebounded from sharp declines early in August, UK share prices posted a somewhat lacklustre performance amid fading hopes of further near-term cuts in interest rates. Investor sentiment was also dampened by mounting speculation over the possibility of higher taxes and spending cuts in the Labour Government’s first Budget in October. The FTSE 100 Index edged up by 0.1% during August, while the FTSE 250 Index declined by 2.4%.

BoE remains cautious: in a speech at the Jackson Hole symposium, Bank of England (BoE) Governor Andrew Bailey  warned that it was still “too early” to declare victory over UK inflation, saying: “We need to be cautious because the job is not completed – we are not yet back to target on a sustained basis”. The Monetary Policy Committee’s next meeting is in September.

Inflation edges higher: the annualised rate of inflation rose from the BoE’s target of 2% to 2.2% during July, representing the first year-on-year increase so far in 2024. On a brighter note, growth in average earnings (excluding bonuses) moderated from 5.7% to 5.4% over the three months to the end of June.

UK economy expands in Q2: having grown by 0.7% in the first quarter of 2024, the UK economy expanded by 0.6% during the second quarter, lifted by activity in the services sector. The rate of unemployment in the UK eased from 4.4% to 4.2% over the three months to the end of June. According to the Office for National Statistics (ONS), summer discounting activity and sporting events provided a boost for retail sales volumes during July. UK consumer confidence remained stable overall during August, according to GfK’s Consumer Confidence Index: although expectations for the UK economy deteriorated for the first time since February, consumers appeared to be more optimistic about their personal financial outlook.

Mining sector dampens dividend expectations: dividend payments from the mining sector are set to fall further this year, dampening the outlook for overall dividend growth in 2024. According to Computershare’s latest quarterly Dividend Monitor, headline growth in dividends is predicted to be 3.8%, while the forecast for underlying growth was cut from 1.5% to just 0.1%. Nevertheless, most sectors are expected to deliver growth, underpinned by strong contributions from the banking and oil sectors.

Global

A volatile August: August provided a roller-coaster ride for investors. The month started with heavy falls across global equity markets but ended with many major indices in positive territory amid renewed expectations that the US Federal Reserve (Fed) would finally move to cut its key interest rate.

Concerns over US growth: weak US employment data triggered a sharp decline in global share prices early in August as investors became worried about the outlook for the US economy. Meanwhile, following the Bank of Japan’s (BoJ’s) decision to increase its key interest rate in July, share prices in Japan plummeted amid an unwinding of the yen carry trade. BoJ Governor Kazuo Ueda subsequently warned that global financial markets “remain unstable” and second-quarter growth fuelled speculation that the BoJ might implement further monetary tightening. The Nikkei 225 Index experienced its second-worst day since 1965 during August, but subsequently rallied to end the month 1.2% lower.

Data provides reassurance: stronger retail sales activity in the US also provided some reassurance that the US economy was not on the brink of recession: retail sales rose at a month-on-month rate of 1% in July. Inflationary pressures eased as the annualised rate of consumer price inflation moderated from 3% to 2.9% in July, representing the smallest 12-month increase since March 2021 and fuelling speculation that the Fed might cut rates in September.

A cut on the cards in the US: expectations of monetary easing were compounded by Fed Chair Jerome Powell’s speech at the Jackson Hole symposium , in which he announced: “the time has come for policy to adjust”. Although he gave no detail on the timing or scale of any cuts, a reduction of at least 25 basis points is widely expected at the Federal Open Market Committee’s next meeting. The Dow Jones Industrial Average Index rose by 1.8% and ended August on another high, having notched up four new closing highs over the month.

Focus on the data: minutes from the European Central Bank’s July meeting  indicated that officials intend to approach their September meeting “with an open mind” suggesting that policymakers remain amenable to another rate reduction following their 25 basis point cut  in June, although their strategy will continue to be informed by data. The Dax Index rose by 2.2% over August.

As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344  or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.

UK

Labour landslide: the Labour Party won a landslide victory in July’s General Election. New Chancellor of the Exchequer Rachel Reeves announced that the Budget will take place on 30 October and warned of “difficult decisions” on tax and public spending. The UK’s national debt rose to its highest level since the early 1960s, triggering conjecture that the Chancellor might have to take action to shore up public finances. Expectations of a cut in UK interest rates provided a boost for medium-sized and smaller UK companies, and these hopes were confirmed after the end of the month when the Bank of England (BoE) cut its key base rate by 25 basis points to 5%. The FTSE 100 Index rose by 2.5% during July, while the FTSE 250 Index – which represents medium-sized companies that tend to have more domestic exposure than the blue-chip index – rose by 6.5%.

IMF upgrades its forecast for UK growth: having stagnated in April, the UK economy grew by a stronger-than-expected 0.4% during May, underpinned by a strong contribution from the services and construction sectors. The International Monetary Fund raised its forecast for UK growth in 2024 from 0.5% to 0.7% but highlighted the risks posed by sticky inflationary pressures in the services sector. Its forecast for 2025 was maintained at 1.5%.

Services inflation remains sticky: the annualised rate of inflation remained unchanged at 2% in June although inflation in the services sector remained persistently strong. Meanwhile, average earnings growth slowed in the three months to May, but still outstripped the rate of inflation at 5.7% year on year. Elsewhere, the BoE’s Chief Economist Huw Pill warned that “uncomfortable strength” in service sector inflation and earnings growth continued to pose a problem for the UK economy.

Record dividend payouts in the second quarter: according to Computershare’s latest quarterly Dividend Monitor, UK listed companies paid out record dividends totalling £36.7 billion during the second quarter of 2024, representing headline growth of 11.2% year on year. However, once the impact of special dividends was stripped out – including a massive £3.1 billion from HSBC alone – total dividend payments were £32.5 billion, reflecting more muted annualised growth of 1% and reflecting dividend cuts from the mining sector. Computershare warned that share buyback programmes “across a variety of sectors (were) exerting a noticeable drag on dividends.”

Global

Political upheaval: the forthcoming US Presidential Election remain at the forefront of newsflow for much of July. While Donald Trump was officially nominated as the candidate for the Republican Party, incumbent President Joe Biden announced that he would not run for re-election and endorsed Vice-President Kamala Harris as the Democratic Party candidate.

Fed holds off: global equity markets began to wobble during July, led by investors in Asia and the US, amid a shift in sentiment towards the technology sector. Nevertheless, as the month ended, US equity markets were lifted by hopes that the Federal Reserve (Fed) might cut interest rates. In the end, Fed policymakers opted to hold rates at a range of 5.25% to 5.5%, and Fed Chair Jerome Powell commented: “The job is not done on inflation”.

Inflation eases: inflationary pressures continued to moderate in the US, dampened by falling fuel costs. The consumer price index eased from 3.3% to 3% year on year during June – and declined 0.1% month on month – fuelling hopes of a rate cut in the not-too-distant future. Meanwhile, having expanded at an annualised rate of 1.4% during the first three months of 2024, the US economy grew by 2.8% during the second quarter. The Dow Jones Industrial Average Index rose by 4.4% during July.

Germany under pressure: the eurozone’s economy expanded by 0.3% during the second quarter and, while the economies of France and Spain expanded by 0.3% and 0.8% respectively, Germany’s economy shrank by 0.1%, raising concerns over the outlook for Europe’s largest economy. Over July, the Dax Index rose by 1.5%. Inflationary pressures continued to moderate in the eurozone: the annualised rate of consumer price inflation eased from 2.6% to 2.5%, although services inflation remained relatively high. Elsewhere, investor sentiment in France was tested by political uncertainties following its snap General Election, but the CAC 40 Index ended July in positive territory, posting an increase of 0.7% over the month.

Japan tightens: the Bank of Japan bucked the global trend and raised its key interest rate to “around 0.25%” following its previous tightening action in March. The central bank also announced plans to begin reducing its programme of bond purchases. The International Monetary Fund   cut its prediction for growth in Japan’s economy from 0.9% to 0.7%. The Nikkei 225 Index fell by 1.2% during July.

As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344  or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.