Keep your investments on track in 2025

With Labour in power for the first time in 14 years, and Donald Trump back in the White House, the past 12 months have been a time of huge change. As we look ahead into 2025, you might be wondering what adjustments you need to make to your finances. A savings and investments review is essential.

Labour’s first Autumn Budget provided much to consider from a financial planning point of view. Key points included changes to UK pensions and Inheritance Tax from April 2027. There are also increases in Capital Gains Tax from April this year. Meanwhile, farmers and small business owners may be deeply affected by changes to Agricultural and Business Property Relief.

Whatever your situation, it’s prudent to re-evaluate your finances on a regular basis. And this year that’s more important than ever.

‘In the absence of any major life event to provoke a major review of your situation, it’s very easy to coast along,’ says Paul Willans, Managing Director of AJB Wealth in Alresford, near Winchester, Hampshire. ‘However, having a realistic strategy could be the key to the future you wish for.’

Here are eight factors to consider in rebooting your finances in 2025:

1. What are your life goals and have they changed?

Take time to reflect on your overall situation and what you hope to achieve. Perhaps retirement is starting to come into focus, you wish to move home, or you simply want to expand your investments. Your personal goals will form the foundation of your investment strategy. Planning ahead will allow you to achieve the optimum outcome.

2. Has your attitude to risk changed?

A wealth manager or financial adviser will always assess your attitude to risk and take this into consideration when making recommendations. It’s likely that your risk tolerance changes as your situation evolves over the years. Other factors, such as the economic situation and geopolitical events, may also lead you to re-evaluate risk.

3. Review your household budget

This is especially important if your income is lagging behind inflation. Some find budgeting apps are handy for keeping track of spending. Whatever your financial situation, it makes sense to check that you’re paying competitive rates for regular bills such as your mortgage, insurance and utilities. Shopping around can often lead to significant savings, and price comparison websites are useful tools. Those who rely on domestic oil for heating may find the prices vary enormously between suppliers, with oil clubs often providing very competitive deals.

4. Take stock of current investments

Consider how well your current savings and investments have performed compared to relevant benchmarks. Be aware of what fees you pay on an annual basis, but bear in mind that the cheapest does not necessarily represent best value. If you pay a management fee, for example, it’s important to consider what work is being done on your behalf, and how you benefit as a result.

When taking stock of your investments, it’s vital to consider your asset allocation – the mix of assets you hold. Your overall investment portfolio should be in line with your risk tolerance and your goals.

5. Are you on track to reach your goals?

Will you have enough to enjoy retirement in the way you’d wish, for example? At AJB Wealth, we use sophisticated cashflow analysis to help clients pave the way for a secure future. By modelling different scenarios, we can plan better for life’s twists and turns. We can also present this information to clients in a clear, accessible way.

6. Ensure that you’re tax efficient

Tax efficiency is often overlooked, but it plays a crucial role in how much wealth you can accumulate, and how much you pass on to your family. In a recent article, we explored in detail how you might be affected by tax changes announced in Autumn Budget 2024.

Pensions have long been seen as a tax-efficient way of passing wealth onto the next generation as there has been no Inheritance Tax (IHT) on pension savings. However, this is set to change in April 2027, as pension savings will be counted as part of a person’s estate. If your existing estate is close to £2 million, then the inclusion of a pension asset in your estate may also result in a reduction in your IHT allowances, thus increasing your overall tax liability beyond the additional tax on your pension fund.

Elsewhere, farmers and business owners will be affected by reduced IHT relief on business and agricultural property.

‘These changes mean it’s essential to review your savings and investments from an estate planning perspective,’ says Willans. ‘A wealth manager can help you explore options. For some, the use of trust arrangements will be a good solution and are likely to see an increase in popularity.’

7. Make use of tax savings

Upcoming increases in Capital Gains Tax mean it’s more important than ever to make use of tax efficient ISAs. Find out more about this in our earlier article. You can contribute up to £20,000 to your ISA the 2024-25 tax year to take advantage of tax-free growth.  If you have existing Cash ISAs, then it may be appropriate to transfer the underlying funds to a Stocks & Shares ISA. This will potentially achieve better returns and also make us of the tax-free gains available.

Despite changes to the law around IHT, pensions remain a tax efficient way of saving. Anyone up to the age of 75 can pay in up to 100 per cent of their earnings, to a maximum of £60,000 per year, and get tax relief on contributions. Non-taxpayers make contributions of up to £2,880, with the government adding £720. Pensions also grow free of Capital Gains Tax and Income Tax.

8. Get the advice you need

‘Many people seek out financial advice at turning points in their lives, such as retirement or the death of a spouse,’ says Willans. ‘Finding the right adviser at an earlier stage should enable you to make more informed decisions and improve outcomes. It also means you have a trusted adviser to lean on during more difficult times.’

Read our earlier articles on how to find the right adviser and the differences between a wealth manager and financial adviser.

AJB Wealth is well placed to help with all aspects of financial planning and investment. To discuss your situation, please book an obligation-free meeting, or call us on 01428 774 070.

Important: The content of this bulletin is for general consideration only and does not constitute advice. No action must be taken, or refrained from being taken, without advice. This company accepts no responsibility for any loss occasioned as a result of any such action, or inaction. You are also reminded that investments can fall, as well as rise. And in the event of early encashment, you may receive less back than your original investment.