As we prepare to step into 2025, reflecting on the evolving financial landscape offers an opportunity to prepare for the year ahead in personal finances, investments, and long-term financial planning. While global markets will react to economic events, geopolitical shifts, and technological advancements, UK-based investors must also consider domestic trends that could shape their financial strategies.

Here, our Head of Advice Joe McGovern explores key themes for 2025, focusing on areas relevant to your financial planning, including taxation, estate planning, and investment outlooks.

1. Economic Resilience and a Mixed Recovery

Global economic recovery is expected to continue in 2025, though at varying speeds across regions. Emerging markets in Asia and Africa may experience faster growth, while developed economies, including the UK, are likely to see more modest expansion. The Office for Budget Responsibility forecasts UK GDP growth to peak at 2% in 2025 before stabilising at around 1.5% later in the parliamentary term.

Domestically, the October 2024 Budget may exert inflationary pressures, potentially leading to increases in interest rates. While these fluctuations pose challenges, adopting a long-term, diversified investment strategy remains critical to managing volatility.

2. Interest Rates and Inflation: A Balancing Act

Central banks globally are focused on balancing inflation control with economic growth. After widespread interest rate cuts in 2024, 2025 may see a pause or slight increases as policymakers aim to contain inflation.

In the UK, inflation is anticipated to hover slightly above the Bank of England’s 2% target, emphasising the importance of considering real returns in investment portfolios. Savers and investors alike should review their strategies to mitigate the impact of persistent inflation.

3. Estate Planning and Inheritance Tax (IHT) in Focus

Inheritance tax planning will be a significant focus in 2025, particularly with changes set to take effect in 2027. These changes include the inclusion of pensions within an individual’s estate for IHT purposes—a notable departure from their traditional treatment outside IHT calculations.

For individuals with substantial pension pots, revisiting estate planning strategies is essential. Ensuring tax efficiency through the use of allowances and trusts where appropriate will be increasingly important.

4. Taxation Trends: A Changing Landscape

The UK’s Labour government is expected to introduce further tax reforms in 2025, building on measures announced in 2024. Likely changes include adjustments to income tax thresholds, capital gains tax, and dividend allowances. Investors should proactively review their tax-efficient investment options to mitigate the impact of these changes.
Maximising annual allowances for ISAs, pensions, and other tax-efficient investments remains a cornerstone of effective financial planning.

5. Sustainability and ESG Investing

Environmental, Social, and Governance (ESG) criteria continue to influence investment strategies. In 2025, demand for green bonds, renewable energy projects, and companies prioritising sustainability is expected to remain strong.

Aligning portfolios with ESG principles not only reflects personal values but may also present opportunities for long-term growth as global demand for sustainable solutions accelerates.

6. Healthcare and Longevity: Emerging Opportunities

The health and well-being sector is poised for continued growth in 2025, driven by ageing populations, advancements in biotechnology, and a growing focus on mental health services.

Investment opportunities in this sector range from innovative biotech firms to telemedicine and digital health platforms, aligning well with a long-term strategy.

7. Geopolitical Uncertainty and Market Volatility

Geopolitical tensions will remain a wildcard in 2025. Trade disputes, ongoing conflicts in the Middle East and Ukraine, and shifts in global leadership could introduce market volatility.

Maintaining diversification across asset classes, sectors, and geographies will be essential to navigate these uncertainties while focusing on long-term goals.

Preparing for the Year Ahead

2025 brings both challenges and opportunities for investors and financial planners. Market fluctuations and policy changes create an opportunity to review and adapt financial strategies to align with your goals. Key considerations include:

• Reviewing inheritance tax planning in light of upcoming changes to pension rules.
• Ensuring investments remain tax-efficient amidst potential tax reforms.
• Maintaining a diversified portfolio to mitigate market volatility.

As always, our priority is to support you in navigating the complexities of the financial world and ensuring your plans remain on track. If you have questions about how these themes might impact your financial goals, please reach out to your adviser.

Let’s approach 2025 with confidence and careful planning.