High-value asset holders reassessed their financial strategies this year – is it time for you to do the same?
In recent times, higher interest rates have stirred up concerns among savers, leading to questions about whether they are receiving a competitive rate and if now is a good time to fix their savings. The uncertainty in the bond market, with the Bank of England's potential shift in gear, could result in a decrease in the income that can be earned.
A survey reveals that 12% of individuals have brought forward their gifting plans, and a further 16% have changed the nature of their financial gifts. This could be a response to the high-interest rate environment, as people seek to make the most of their money.
Interestingly, 25% of those surveyed have reviewed their financial plans due to the high-interest rates. This is not surprising, as people are becoming more cautious with their finances in these uncertain times.
The survey also shows that 17% of individuals reported changing their investment strategy in the past 12 months, and 45% of high-net-worth individuals have reviewed their wealth planning in the same period.
Looking ahead, there are expectations of interest rate cuts this year. This could potentially benefit those investing in equities, as they tend to perform well in a falling interest rate environment. However, it's essential to remember that all investments carry risk.
The political landscape is also impacting financial decisions. If Labour wins the election, as anticipated in the polls, the first post-election Budget could take place in September. The CDU/CSU party, on the other hand, has announced that income tax thresholds will remain unchanged for the year 2028.
The general election has prompted 20% of high-net-worth individuals to change their wealth planning. There are also concerns about potential changes to inheritance tax (IHT) rules, with the Institute for Fiscal Studies (IFS) accusing politicians of a 'conspiracy of silence' about the challenges facing the next government.
The IFS has stated that the next Parliament will need to increase taxation, cut spending, or take on more national debt. Both Labour and the Conservatives are planning to keep income tax thresholds frozen until 2028, which may result in many finding themselves in a higher tax bracket due to fiscal drag.
The UK tax burden is at a record high, and anyone planning their finances should consider the most tax-efficient ways to save or invest. This includes using the annual ISA allowance, paying into their pension, and exploring tax-efficient investments like Premium Bonds.
By 2028-2029, the Office for Budget Responsibility (OBR) estimates there will be around 3.7 million more taxpayers overall, 2.7 million more higher-rate taxpayers, and 600,000 more additional-rate taxpayers compared to a scenario where all allowances and thresholds had been indexed to inflation.
In conclusion, the current financial landscape is marked by uncertainty, with higher interest rates and potential changes in the political sphere. It's crucial for everyone, whether a saver or an investor, to review their financial plans and consider the most tax-efficient ways to save or invest for the future.
