Investment market update: August 2024

August was a rollercoaster month for investors, with the global stock market experiencing significant volatility. Read on to find out what may have affected your investments.

Many market indices saw sharp falls early in August sparked by fears that the US is on track for a recession. However, investors are likely to have experienced some recovery in the weeks that followed.

On 16 August, global stock markets boasted the best week of 2024 – the MSCI main index of world stocks was up 3.5% over the week.

UK

There was positive news from the Office for National Statistics, which reported the UK economy grew by 0.6% in the second quarter of 2024. The figure lent further weight to claims that the UK is leaving the shallow recession at the end of 2023 behind.

However, the data showed that GDP per head is 0.1% lower in real terms than it was in the second quarter of 2023. This measure is often used as a broad barometer for living standards and economic wellbeing.

Despite this, the UK is set to be the third-fastest growing economy in the G7, behind only Japan and the US.

The Bank of England (BoE) also had an optimistic outlook. The Bank more than doubled its growth forecast for 2024 to 1.25%. It also decided at the start of August to cut the base interest rate for the first time since the pandemic to 5%.

Official data shows inflation increased to 2.2% in the 12 months to July 2024. It’s the first time inflation has increased since December 2023, but it wasn’t as sharp as some economists were expecting.

With chancellor Rachel Reeves set to deliver her first Budget on 30 October 2024, news that public borrowing soared could place pressure on her plans.

Public borrowing hit £3.1 billion in July 2024 – £1.8 billion more than in July 2023. Worryingly, the Office for Budget Responsibility previously estimated the government would only need to borrow £100 million. The news led to speculation that taxes will be hiked and spending plans cut to plug the black hole.

Like many other markets, the UK experienced volatility at the start of August. On 5 August, the FTSE 100 – an index of the 100 largest companies listed on the London Stock Exchange – fell by 2%. It did start to recover the following day with a modest 0.23% rise.

There was good news for Rolls-Royce shareholders this month. The company announced it would pay dividends for the first time since the pandemic, as underlying profit is expected to be higher than previously estimated thanks to a turnaround plan. The announcement led to shares rising by almost 10%.

Interestingly, the High Pay Centre found that FTSE 100 chief executive pay reached a record high. The median pay in 2023 was £4.19 million. For the second year, AstraZeneca chief executive Pascal Soriot topped the list with pay of £16.85 million.

Europe

The S&P Purchasing Managers’ Index (PMI) for the eurozone indicates the bloc is growing. However, Dr Cyrus de la Rubia, the chief economist at Hamburg Commercial Bank, warned it was at a “snail’s pace”.

Rubia also noted that the eurozone has benefited from several large events so far this year, including the European Football Championship in Germany, the Paris Olympics, and Taylor Swift concerts. So, a slowdown could be experienced in the coming months.

Eurostat data shows unemployment increased to 6.5% in June 2024. Rising unemployment could signal that businesses aren’t confident about the future.

Similar to the UK, European stock markets experienced volatility early in August. The Stoxx Europe 600 index tumbled 2.2% on 5 August but moved back into the red the following day. 

US

US job data sparked market volatility when figures from the Bureau of Labor showed unemployment increased to 4.3% in July 2023 and only 114,000 new jobs were created – far fewer than the 175,000 economists had anticipated. Coupled with poor earnings from some key technology businesses, stock markets fell.

On 2 August, technology-focused index Nasdaq fell by around 10% from its peak amid concerns that the US may enter a recession by the end of this year. Indeed, JP Morgan believes there’s a 1 in 3 chance the US will fall into a recession in 2024.

When markets reopened on 5 August, they sunk deeper into the red, with the Dow Jones falling by 2.8%, the S&P 500 tumbling by 4.2%, and the Nasdaq declining by 6.2%.

When Wall Street started to rally on 7 August, it was technology stocks that led the way. Salesforce saw its stocks rise by 3%, while Amazon (2.5%), Apple (2.27%) and Microsoft (2.2%) all gained too. The rally wasn’t universal though – Airbnb’s shares dropped by 14% as demand fell in the US and it missed profit expectations for the second quarter of 2024.

While gains were made, the Guardian reported that an estimated $6.4 trillion (£4.88 trillion) was erased from global stock markets in the three weeks to 7 August. Goldman Sachs also warned that the stock market correction hadn’t gone far enough.

There was some good news when PMI data indicated the service sector had increased “markedly” in July 2024, which could ease some concerns about an impending recession.

Asia

US recession fears were felt around the world.

Japan’s Nikkei index fell by 5.8% on 2 August and then suffered its worst day since 1987 on 5 August when it closed more than 12% down, while the broader Topix index experienced a similar fall. The indices bounced back, with the Nikkei’s value rising by more than 10% a day later.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Guide: 5 insightful lessons you could learn from the world’s most successful investors

Even for professional investors, consistently delivering above-average market returns on investments is challenging. Those who have delivered high returns over a long time frame are remembered among the world’s greatest investors.

While you may not have the same resources that a professional investor may have at their disposal, you could learn valuable lessons from their work. Renowned investors might have unique philosophies and strategies, and sometimes they share their market wisdom.

This useful guide covers some practical lessons you can learn, including:

● Learn the value of investing from Warren Buffett

● Take the time to understand your investments like Peter Lynch

● Be prepared for the ups and downs of the investment market like John Templeton

● Embrace diversification like Thomas Rowe Price Jr

● Include a margin of safety like Benjamin Graham.

Download your copy of ‘5 insightful lessons you could learn from the world’s most successful investors’ now to discover investment lessons that could guide your decisions.

If you’d like to talk to us about your investment portfolio, please get in touch.

Two-thirds of UK adults don’t have a will. Here’s how it could affect your legacy

Failing to set out your wishes in a will could mean your assets aren’t passed on to the loved ones you’d like to benefit from your estate. As a result, this could have a significant effect on your legacy.

A will is one of the main ways to ensure your assets are passed on to your loved ones according to your wishes. So, if you don’t have a will in place, what will happen?

Intestacy rules are applied if you pass away without a will

If you pass away without a valid will, also known as “intestate”, the way your estate will be distributed will follow strict rules, which could be very different from your wishes.

In England and Wales, if you’re married with no children, everything will go to your spouse or civil partner. If you’re married with children, your spouse or civil partner will inherit:

· Your personal possessions

· The first £322,000 of your estate, and

· Half of your remaining estate, with the other half being shared equally among your children.

If you’re not married and have children, your entire estate would be divided equally between your children.

If you’re not married and don’t have any children, your estate would be shared equally among one of the following groups of people in this order:

· Parents

· Siblings, or nieces or nephews if your siblings have passed away

· Grandparents

· Aunts and uncles.

Finally, if no living relative can be found, your estate will pass to the Crown. Most of these funds go to the Treasury. According to the BBC, as of November 2023, there were more than 6,000 people on the government’s list of unclaimed estates.

As you can see, intestacy rules might mean some family members or friends who you’d like to benefit from your estate are overlooked. It’s not just about wealth either, as you may have sentimental items you want to go to a particular person. Perhaps you’d like your granddaughter to inherit your jewellery, or pass on your record collection to a music-loving nephew.

Intestacy rules also don’t consider whether you’d like a portion of your estate to go to organisations or charities you might wish to support.

By not writing a will, you’re missing out on an opportunity to set out exactly who you’d like to benefit from your estate.

Despite this potential impact on your legacy, research from the IRN Legal Wills and Probate Consumer report suggests just 36% of UK adults have a will.

5 other practical reasons to write your will

Ensuring your assets are passed on to your intended beneficiaries isn’t the only reason to prioritise writing a will if you haven’t already. Here are five other practical reasons.

1. Name a guardian for your children

If you have children under the age of 18 or other dependants, you can use your will to name their appointed guardians if the worst should happen and you pass away. A guardian would take full responsibility for your children until they reach adulthood. If you have not named a guardian, the court will appoint one, who may not be the person you’d choose.

2. Set out your funeral wishes

While funeral wishes listed in a will aren’t legally binding, they can be very useful for your loved ones. Organising a funeral while grieving and putting affairs in order can be stressful, and your family may worry about making the “wrong” decision. Making a note of your preferences could provide much-appreciated guidance.

You might also decide to set money aside to pay for your funeral in your will too.

3. Potentially reduce an Inheritance Tax bill

If your estate exceeds the nil-rate band, which is £325,000 in 2024/25, it could be liable for Inheritance Tax (IHT). In some cases, your will could be used to potentially reduce the bill.

For example, if you leave your main home to your children or grandchildren, you’ll usually be able to use the additional residence nil-rate band, which in 2024/25 could increase the amount you can pass on before IHT is due by £175,000.

There are often other ways you can reduce an IHT bill. If you’d like to discuss estate planning that considers IHT, please contact us.

4. List the executor of your will

An executor is responsible for carrying out the instructions in your will and handling your estate. It can be a time-consuming task, and one that some loved ones may find difficult. So, you might want to take some time to consider who would be suited to the role and name them as the executor in your will. 

You can choose a family member or friend to be an executor. Alternatively, you may appoint a professional executor, such as a solicitor or accountant, which could be especially useful if your estate is large or complex.

5. State who you’d like to care for your pets

If you have pets, you can use your will to set out your wishes regarding their care, including who will look after them. While you can’t leave assets directly to your pets, you might want to set aside some money for the person who will care for them to cover the costs.

Understanding your estate could be valuable when you’re writing a will

If you need to write a will, understanding your estate could be a valuable place to start. Considering your assets and how the value of them might change during your lifetime could affect how you wish to pass them on.

Please get in touch to talk about your estate plan, from what you want to include in your will to how to mitigate a potential IHT bill.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning, Inheritance Tax planning, or will writing.

3 fundamental questions to answer if you’re investing for children

Building a nest egg for your child or grandchild could give them a head start when they reach adulthood. It might allow them to pursue further education, get on the property ladder, or even enjoy a gap year. While saving is one option you might want to consider, investing for children could yield higher returns.

Investing could help the nest egg grow at a faster pace

When you’re putting money aside for a child, a savings account or even a piggy bank might come to mind first. Holding assets in cash can feel “safer” as it’s often easily accessible and it won’t be exposed to investment risk.

However, unless the savings earn interest at a higher rate than inflation, the value of the nest egg could fall in real terms.

Let’s say you added £20,000 to a savings account for your child in 2018. According to the Bank of England, over the next five years, inflation averaged 4.5% a year. So, if the savings didn’t earn almost £5,000 in interest during that period, the spending power has fallen.

Investing a nest egg does mean taking some risk. Yet, it could provide an opportunity for the earmarked money to grow at a faster pace than inflation.

If you want to invest for a child to give them a financial boost when they reach adulthood, here are three important questions to consider.

1. Is investing appropriate for your goals?

While investing has the potential to grow the nest egg at a faster pace, that doesn’t mean it’s automatically the right option.

In some circumstances, saving might be better suited to your goals. For instance, if your child is a teenager and plans to use the nest egg to pay for university, the shorter time frame could mean investing isn’t appropriate as you’re at greater risk of being affected by market volatility.

There’s no one-size-fits-all solution if you decide to invest either. So, considering how much risk you’re comfortable with and whether it suits your circumstances could help you make decisions that are right for you.

2. How should you invest to create a nest egg?

There’s more than one way to invest on behalf of a child. Here are some key options you might want to consider.

· Junior ISA

Like their adult counterparts, a Junior ISA (JISA) is a tax-efficient way to save or invest. If you hold investments in a JISA, the returns will not be liable for Capital Gains Tax (CGT). According to government statistics, of the 1.2 million JISAs that were subscribed to in 2021/22, 58% were investment accounts.

In the 2024/25 tax year, you can add up to £9,000 to a JISA.

However, you should keep in mind that the money cannot be accessed until the child turns 18. Once they reach adulthood, the JISA will convert into an adult ISA, and they’ll be able to use the nest egg how they wish. Discussing how you’d like them to use the money as they’re growing up could help them make wiser decisions.

· Trust

If you’d like to have more control over when and how the investments are used, placing them in a trust might be useful.

You can set out how the trust is to be run and the conditions of when it can be accessed. For example, you may state your child can take control of the assets when they’re 25, but they may also use a portion of the money before then to cover education expenses.

There are several different types of trust to choose from. Working with a solicitor may help you decide which option is right for you and reduce the chance of mistakes occurring when you’re setting up a trust.

· Pension

They might not have entered the world of work yet, but it’s not too soon to start thinking about your child’s long-term financial security.

In fact, due to the long investment time frame providing ample time for returns to compound, using a pension to invest could create a sizeable nest egg.

Those who don’t have an income, including children, can tax-efficiently add up to £2,880 to a pension in 2024/25. Contributions benefit from tax relief, so if you contributed the maximum amount, a total of £3,600 would be added to the pension.

According to calculations from interactive investor, if you contributed £2,880 to your child’s pension when they’re born, they’d have a nest egg of almost £72,000 60 years later, assuming average returns of 5% a year net of fees, without having to make any additional deposits.

Of course, your child wouldn’t be able to access the nest egg until they reach pension age. The pension age is currently 55, rising to 57 in 2028, and it’s likely to increase further during your child’s lifetime. The tax treatment of pensions is also subject to change.

3. Could the investment returns be liable for tax?

While it might seem strange to consider tax liability if you’re investing for a child, it could be an important factor.

Just like an adult, a child may have to pay Income Tax if their total income exceeds the Personal Allowance, which is £12,570 in 2024/25. In addition, if they earn more than £100 in interest in a single tax year from the money you have given them, you could become liable for tax on the interest earned too.

So, while it’s rare that children will pay Income Tax, it’s not impossible. As a result, you might consider using tax-efficient ways to invest, such as through a JISA or a pension.

Contact us to make your children or grandchildren part of your financial plan

Making your children or grandchildren part of your financial plan could help you reach your goal if you want to lend a helping hand. Whether you want to offer regular support or a one-off gift, a financial plan may help you identify the effect it might have on your finances, how to gift tax-efficiently and highlight other factors you may need to consider.

Please contact us to talk about how you could use your assets to help your loved ones.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Why taking your pension as a lump sum could leave you with a huge tax bill

Taking a lump sum out of your pension could provide you with more financial freedom. Yet, it could also land you with a large and unexpected tax bill.

Read on to find out what you need to know about tax and withdrawing lump sums from your pension.

Your pension withdrawals may be liable for Income Tax

You can take up to 25% (up to a maximum of £268,275 in 2024/25) of your pension tax-free. You can choose to access this tax-free portion as a single withdrawal, or spread this entitlement across multiple withdrawals throughout retirement, with a portion of each being tax-free.

However, the other 75% of your pension will usually be classed as income when you access it. So, if the total amount you withdraw in a single tax year exceeds the Personal Allowance, which is £12,570 in 2024/25, it could become liable for Income Tax.

Withdrawing large lump sums could mean you face an unforeseen tax bill or lead to you paying more in tax than you would if you spread out withdrawals.

You should note that pension withdrawals will be added to your other income when calculating your Income Tax bill. As a result, you might also need to consider the money you receive from employment, the State Pension, or interest on savings when working out how much tax you’ll pay.

Let’s say you hold £100,000 in your pension and you want to withdraw all the money from it as a single lump sum. Assuming you didn’t have any other sources of income in 2024/25, then:

· £25,000 would be tax-free

· £12,570 would fall into your Personal Allowance and wouldn’t be liable for Income Tax

· £37,700 would fall into the basic-rate tax bracket and be taxed at a rate of 20%

· £24,730 would fall into the higher-rate tax bracket and be taxed at a rate of 40%.

In this scenario, that could lead to an Income Tax bill of £17,432. That’s a sizeable portion of your pension that’s going to HMRC.

Research from Standard Life indicates that pension holders could be unwittingly making withdrawals that lead to large tax bills.

Indeed, between October 2022 and March 2023, 221 people fully withdrew a pension worth £250,000 or more, which could lead to a tax bill of at least £97,500 each. Similarly, more than 1,500 savers fully encashed pensions worth between £100,000 and £249,000 during the same period.

Further data published in FTAdviser suggests that half a million pensions were emptied the first time they were accessed in 2022/23. The general election campaign and Labour’s subsequent victory also reportedly led to more savers draining their pensions due to fears about proposed taxes.

While there might be good reasons to fully withdraw your pension, understanding the tax implications could help you decide if it’s the right decision for you.

Managing pension withdrawals across several tax years could reduce your overall tax bill. As your Personal Allowance resets each tax year, you’d access a greater portion of your pension tax-free, and it might help you avoid paying the higher or additional rate of Income Tax.

2 insightful questions to consider before taking a lump sum from your pension

1. What’s behind your decision to withdraw a lump sum from your pension?

Before you take a lump sum from your pension, consider what you’ll use the money for – could you use other assets to cover your plans that would result in a lower tax bill?

If you don’t have plans to use the money, examine the motivation behind your decision. In some cases, emotions and bias may be harming your decision-making.

For example, the FTAdviser research indicates that some savers have responded to concerns that the Labour Party could make changes that will affect their pension.

Fear might play a role in other ways too – you may be worried about the investment risk your pension is exposed to and feel that holding your money in cash is “safer”. However, as inflation is often higher than the rate of interest a savings account offers, taking your pension to hold in a cash account could erode its value in the long term.

2. How will withdrawing a lump sum affect your long-term financial security?

As well as understanding the tax bill, you may want to consider how withdrawing a large part of your pension could affect your retirement income in the future.

Reducing the value of your pension by taking a lump sum could mean you’re at risk of running out of money in your later years. In addition, withdrawing a lump sum could affect the expected returns your pension will deliver throughout retirement.

It could be sensible to take some time and calculate the potential long-term effects of taking a lump sum from your fund. This could highlight where you could be placing your long-term security at risk, or give you more confidence to proceed. A financial plan could help you visualise how taking a lump sum from your pension might affect your future so you can understand which option is right for you.

We could help you cut your tax bill

Working with us to create a holistic financial plan could help you identify ways to reduce your overall tax bill. We’ll work with you to understand your income needs and assets, and build a plan for accessing your pension that could minimise the amount of tax you pay.

To talk to us about your pension and tax liability, please get in touch.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

Research: Lifestyle changes could relieve the symptoms of Alzheimer’s

If you know anyone who has suffered from dementia, you will understand what a cruel illness it can be. From forgetting simple things to aspects of your loved one’s personality changing, dementia can completely transform a person you thought you knew.

However, as you might’ve seen in the news, new advancements in dementia treatments could help to diagnose and treat the illness more effectively than ever before.

Read on to discover more about these scientific breakthroughs and what they could mean for anyone who might struggle with dementia in the future.

What is dementia?

Dementia is a syndrome (a group of symptoms) associated with an ongoing decline of brain functioning, which means there are many different causes and types of dementia.

Two of the most common forms of dementia are Alzheimer’s disease and vascular dementia.

Although doctors are unsure what causes Alzheimer’s disease, they have identified a number of risk factors, including:

· Increasing age

· Untreated depression

· A family history of the condition.

Vascular dementia, on the other hand, is caused by reduced blood flow to the brain. This most commonly happens as a result of a stroke and affects around 180,000 people in the UK.

What are the advancements in diagnosing dementia?

Teams from Dementias Platform UK and UCL are working together to create the Blood Biomarker Challenge, a project which aims to revolutionise dementia diagnoses.

Currently, only 2% of people with dementia can access specialised tests (such as PET scans or lumbar punctures), which will confirm which type of dementia they have.

These researchers are recruiting participants from sites across the UK to trial new blood tests designed to diagnose a range of types of dementia.

The goal is for these teams to provide evidence that the blood tests are ready for use in the NHS, paving the way for them to be made widely available to anyone who might benefit in the next five years.

Quick and accurate diagnosis of dementia is crucial, as it would allow people to access vital care and support that could help them manage their symptoms.

How do you treat dementia?

Although there is no known cure for dementia, scientists are experimenting with new treatments that can help to relieve patients’ symptoms.

In a recent CNN documentary, The Last Alzheimer’s Patient, two Alzheimer’s sufferers claim to have beaten the deadly disease through healthy lifestyle changes.

Cici Zerbe claimed to experience a reversal in her symptoms after participating in a clinical trial in the US, which explored the effects of intensive lifestyle changes on early dementia.

These changes included switching to a plant-based diet, regular exercise, group support sessions, yoga and meditation.

BBC radio and comedy producer Simon Nicholls also took part in this trial as he carried two copies of the gene variant ApoE4, the greatest genetic risk factor for Alzheimer’s. One copy of the gene is associated with three to four times the risk of Alzheimer’s, but two copies increased his risk twelvefold.

After 14 months of drastically changing his lifestyle, Simon’s biomarkers for Alzheimer’s disappeared.

He cited a focus on physical activity – including strength training three times a week, walking 10,000 steps every day, and jogging or cycling every morning – and a healthy diet as the reason for the reversal of his symptoms.

What can I do to reduce my risk of dementia?

It’s important to remember that Cici and Simon are only two people in a larger study, so their experience may not be universal. However, cardiovascular disease is known to be a common cause of dementia, and it can be influenced by lifestyle changes.

So, what can you do to reduce your risk of dementia?

1. Eat healthily

Unhealthy foods can increase your cholesterol levels, which can build up hard plaque on your arteries and increase your risk of cardiovascular disease or heart attacks.

2. Exercise regularly

Exercising regularly can reduce your risk of a number of illnesses, including coronary heart disease, strokes, type 2 diabetes, and cancer.

The NHS recommends that adults take part in 150 minutes of moderate or 75 minutes of intense activity every week.

3. Quit smoking and enjoy alcohol responsibly

Smoking can increase your risk of cardiovascular disease and strokes, among other illnesses, which have been linked to dementia.

Drinking more than the recommended 14 units of alcohol a week can shrink the parts of the brain involved in memory, and long-term heavy drinking can lead to alcohol-related dementia.

Quitting smoking and drinking may be hard, but it is one of the best things you can do for your health. Speak to your doctor if you need advice or help with kicking these unhealthy habits.

4. Improve your sleep hygiene

Researchers found that sleep deprivation could be linked to Alzheimer’s disease.

Their study found that people in their 50s and 60s getting six hours of sleep or less were 30% more likely to be diagnosed with dementia than those who got a regular amount of sleep.

Adults are recommended to get seven to nine hours of sleep every night.

Inheritance Tax: The basics you need to know about the “death tax”

Often dubbed “death tax” or “Britain’s most-hated tax” in the media, Inheritance Tax (IHT) may seem complex, and you might be unsure if it’s something you should consider as part of your estate plan.

Over the next few months, you can read about the essentials you need to know, how to reduce a potential tax bill, and the importance of regular reviews.

IHT is a tax that’s levied on the estate of someone who has passed away if its value exceeds certain thresholds.

Around 4% of estates were liable for IHT in 2023/24 and it led to the Treasury receiving a record £7.5 billion, according to a Professional Adviser report. That’s an increase of £4 million when compared to the previous tax year.

With a standard tax rate of 40%, IHT could have a huge effect on the wealth you pass on to loved ones. According to HMRC, the average IHT bill in 2020/21 was £214,000. 

There are often ways you could reduce an IHT bill if you’re proactive. One of the first steps to take is to find out if your estate could be liable for IHT.

So, read on to find out how the IHT thresholds work.

Most estates can pass on up to £500,000 before Inheritance Tax is due in 2024/25

Your estate encompasses all your assets. So, you might need to consider savings, investments, property, and material items when you’re calculating its value.

The threshold for paying IHT is £325,000 in 2024/25; this is known as the “nil-rate band”. If the total value of your estate is below this amount, no IHT will be due.

Many estates can also make use of the residence nil-rate band. In 2024/25, this is £175,000. To use this allowance, you must pass on your main home to children, grandchildren, or other direct descendants.

As a result, the majority of estates can pass on up to £500,000 before they need to consider IHT.

If the net value of your estate (the value of assets less any liabilities) exceeds £2 million, you could be affected by the tapering of the residence nil-rate band. If you have any questions about your IHT allowances, please contact us.

Importantly, if you’re married or in a civil partnership, your partner can inherit your entire estate without having to pay an IHT bill. In addition, your partner could also inherit unused allowances when you pass away.

In effect, when you’re planning as a couple, this means you could pass on up to £1 million before IHT is due.  

Remember, the value of your assets may change

While the value of your estate could be under the IHT thresholds now, will that still be the case in the future?

Both the nil-rate band and residence nil-rate band are frozen until April 2028. This freeze is expected to pull more estates above the threshold. Indeed, the Institute for Fiscal Studies estimates that 7% of estates could be liable for the tax by 2032/33.

So, if the value of your assets increases, you might unexpectedly find that the value of your estate now exceeds the threshold for paying IHT. Regular reviews of your assets and estate plan could help you assess if IHT might be something you need to consider in the future.

Contact us to discuss if your estate could be affected by Inheritance Tax

If you’re worried that IHT could affect your estate, please contact us. We could help you formulate an estate plan that’s tailored to you and your wishes.

Read our blog next month to discover some of the ways you might be able to mitigate an IHT bill.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate Inheritance Tax planning or estate planning.  

Investment market update: July 2024

In July, the markets were affected by general elections taking place in the UK and France, and the ongoing presidential campaign in the US. Read on to find out what else affected investment markets in July 2024.

Uncertainty and numerous other factors may affect the value of your investment portfolio. However, for most investors, long-term trends are a better indicator of their strategy’s performance than short-term movements. Returns cannot be guaranteed, but, historically, markets have risen in value over longer time frames.

UK

The UK public took to the polls on the 4 July. The results of the general election ended 14 years of Conservative rule when the Labour Party secured a majority.

The following day saw the FTSE 100 – an index of the 100 largest companies listed on the London Stock Exchange – rise by 0.3% when trading opened.

Housebuilders saw some of the biggest gains as Labour made building 1.5 million new homes over the next five years a key manifesto pledge. According to the Guardian, Persimmon, Vistry Group, Taylor Wimpey and Barratt Developments all saw rises between 1.7% and 2.5%.

Mid-cap index FTSE 250 also benefited from a post-election bounce when its value increased by 1.8% and reached a two-year high.

New prime minister Keir Starmer stepped into the top job and received welcome news when official statistics were released.

Data from the Office for National Statistics shows that after no growth in April, GDP increased by 0.4% in May. The figure suggests the UK economic recovery is gaining momentum after a technical recession at the end of 2023.

Inflation remained stable during July, as prices increased by 2%, which is the Bank of England’s (BoE) target. The data paved the way for the BoE’s Monetary Policy Committee to cut its base interest rate on 1 August from 5.25% to 5%.

According to S&P Global’s Purchasing Manager’s Index (PMI), the momentum in the service sector in May started to slow in June. However, the slowed pace was linked to the general election as some individuals and businesses opted to see the outcome before they placed orders. So, the sector could see an uptick in July.

Despite the positive signs, many businesses are still struggling. According to business recovery firm Begbies Traynor, the number of firms in “significant” financial distress jumped by 10% in the second quarter of 2024 compared to the first three months of the year.

The numbers are even more stark when you compare them to the same period in 2023 – with a 36.9% rise. Of the 22 sectors monitored, 20 saw an increase in the number of firms in difficulty.

Europe

Inflation across the eurozone fell slightly to 2.5% in the 12 months to June 2024, according to Eurostat. The figures show inflation varied significantly across the bloc. Finland recorded the lowest rate of inflation at 0.5%, while Belgium had the highest rate at 5.4%.

With the headline inflation figure still above the 2% target, the European Central Bank opted to hold interest rates.

PMI figures suggest the manufacturing sector is struggling in the eurozone. It was partly pulled down by Germany’s enormous manufacturing sector, which has been contracting for the last two years, according to the PMI. A PMI reading above 50 indicates growth, so Germany’s reading of 43.5 in June suggests the country has some way to go before it starts to grow again.

The parliamentary election in France and its unexpected twists led to market volatility. On 1 July, the CAC 40 index, which includes 40 of the most significant stocks on the Euronext Paris stock exchange, was up 1.5% as it became less likely a far-right party would secure a majority.

The final shock results saw the formation of a left-wing coalition. The uncertainty around whether the left could work with Emmanuel Macron’s centrist party led to the CAC 40 falling by 0.5% on 8 July when trading opened. Yet, it returned to positive territory later in the day.

The EU is reportedly planning to impose an import duty on cheap goods amid concerns from retailers in a move that could affect foreign businesses, such as Temu and Shein. The current limit for import duty is €150 (£126.13), which allows some retailers to ship products from overseas while avoiding a levy.

US

The US presidential election doesn’t take place until 5 November, but candidates have already been campaigning for months.

Following an assassination attempt on Republican candidate Donald Trump, Wall Street rose on the 15 July. Expectations of a victory for Trump led to the S&P 500 index rising 0.42%. The share price of Trump’s media company far outstripped the market when it rose by 70% at the opening and briefly led to the business being valued at $10 billion (£7.76 billion).

With Joe Biden stepping out of the presidential race, the results of the election are far from certain and it’s likely to continue affecting markets.

Inflation in the US continued to fall in the 12 months to June. However, at 3%, it’s still above the Federal Reserve’s 2% target.

Official statistics also show that the US trade deficit widened slightly as exports fell by 0.7% month-on-month in May while imports fell by 0.3%. The deficit now stands at around $75.1 billion (£58.3 billion) and could be a drag on growth in the second quarter of 2024.

American cybersecurity company Crowdstrike saw its share price plunge by more than 13% when a software bug crashed an estimated 8.5 million computers around the world on 19 July. The error led to services grinding to a halt as it affected banks, airlines, railways, GP surgeries, and many other businesses globally.

Meta, owner of Facebook and Instagram, also saw its share price fall after the EU ruled it breached a new digital law. Meta’s advertising model that charges users for ad-free versions of its social media platforms that don’t use personal data for advertising purposes was found to breach consumer protection rules. Meta could now face fines of up to 10% of its global revenue.

Asia

A growing interest in artificial intelligence led to Japan’s Nikkei 225 index reaching a record high on 9 July, when it increased by 0.6%.

Over the last few months, statistics have suggested that China could face some challenges if it’s to maintain its pace of growth. However, data shows exports grew at their fastest rate in 15 months in June 2024 thanks to a boost in the sales of cars, household electronics, and semiconductors.

Year-on-year, Chinese exports grew by 8.6% to $307.8 billion (£258.8 billion). Over the first half of 2024, exports totalled a staggering $1.7 trillion (£1.43 trillion) – a 3.6% increase when compared to a year earlier. Coupled with weaker imports, it led to a record $99 billion (£83.25 billion) trade surplus.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.