Frankie’s Winter Market Update 2024

• Currency Markets: The British pound demonstrated remarkable resilience throughout 2024. Despite speculation around potential rate cuts, confidence in UK economic fundamentals has kept sterling strong against major currencies. In contrast, the euro struggled due to aggressive monetary easing by the ECB and ongoing trade uncertainties, particularly regarding potential US tariffs. The US dollar experienced a volatile year, initially depreciating but recovering on post-election optimism.
• Commodities: Precious metals, led by gold and silver, delivered standout performances. Geopolitical tensions, strong central bank demand, and election-related uncertainties drove gold prices up by over 30%, with silver gains exceeding 35%. Natural gas prices also surged amid colder weather forecasts, fueling demand in Europe and Asia. However, oil faced a challenging year due to weak Chinese demand and a global shift toward renewable energy.
• Equities: Global stock markets saw mixed performances, with US markets—particularly the tech sector—leading gains. Innovations in artificial intelligence drove strong earnings, pushing the Nasdaq and S&P 500 to new highs. In the UK, equities remained steady, benefiting from declining inflation and stable corporate earnings. However, concerns around valuations and potential trade tariffs loom large heading into 2025.

• Central Bank Policy: The Bank of England and other central banks are likely to continue measured rate cuts, but any resurgence in inflation could prompt a policy shift. Interest rate differentials will play a key role in currency movements.
• Trade Dynamics: Potential US tariffs and ongoing trade tensions present risks for global markets, particularly for the Eurozone and export-driven sectors.
• Technological Innovation: Advances in AI and emerging technologies offer growth potential, particularly in the tech and innovation-driven sectors.
• Geopolitical Risks: Political uncertainties, from trade disputes to broader geopolitical conflicts, remain unpredictable but could have significant market implications.

• Public finances are forecast to move into surplus by 2028, aligning with the timeline of the next general election.
• Economic growth is expected to remain below 2% over this period.
• Inflation is projected to stay below 3% for the next five years.

Confirmed timeline for key changes

The Winners and The Losers

• UK Domiciled Individuals Living Abroad: The Budget introduces a significant change to the inheritance tax (IHT) rules for UK domiciled individuals who have relocated abroad. Previously, it was challenging to lose UK domicile status for IHT purposes. Under the new residency-based test, UK domiciled expats who have been non-resident for more than 10 out of the last 20 years will no longer fall within the UK IHT scope, except for UK situs assets. Furthermore, eligible individuals returning to the UK may benefit from a 10-year exemption from UK IHT on foreign assets.
• Temporary Residents in the UK: Individuals moving temporarily to the UK can now enjoy their first four years of residency without a UK tax charge on foreign income and gains, provided they were not UK residents in any of the previous 10 tax years. Additionally, these individuals may bring such foreign funds into the UK tax-free, offering a welcome improvement to the current remittance basis rules.
• Support for EIS and VCT Schemes: Investors in the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) will welcome the 10-year extension of these regimes, which are now set to continue through to April 2035.
• Historic Non-Domiciled Individuals with Offshore Funds: From 6 April 2025, a new Tainted Remittance Facility (TRF) will enable individuals with “tainted” offshore mixed funds to designate these funds and pay UK tax at a reduced rate of 12% for the 2025/26 and 2026/27 tax years, and 15% thereafter. Once taxed, these funds can be remitted to the UK without further tax liabilities or reporting obligations.
• Draught Duty Reduction: While modest, a 1.7% cut to draught beer duty equates to a 1p saving on a pint at the pub, offering a small win for those enjoying the occasional drink.
• Income and NIC Threshold Adjustments: From 2028/29, income tax and National Insurance thresholds will increase in line with inflation, and the State Pension triple lock will remain in place.
• No Wealth Tax or Lifetime Gifting Changes: Despite pre-Budget speculation, there were no announcements introducing a wealth tax, an exit tax for individuals, or changes to lifetime gifting rules. However, this does not preclude the possibility of future amendments. An exit-type tax has been introduced for specific offshore trusts where the settlor leaves the UK.

• Pensions: From April 2027, unused pensions will be included in an individual’s IHT estate on death. This creates a difficult decision for those with substantial pension pots who had anticipated passing them on free of IHT: either face income tax on pension withdrawals or risk IHT on the remaining balance upon death. Beneficiaries may also encounter income tax exposure on inherited pensions.
• Capital Gains Tax (CGT): Investors and business owners face an increase in the CGT rate to 24%. While the Chancellor reaffirmed the £1 million Business Asset Disposal Relief (BADR) lifetime limit, the relief will be less valuable as CGT rates rise further—to 14% from April 2025 and 18% from April 2026.
• Business Owners and Farmers: Historically, business and agricultural assets qualified for 100% IHT relief, but this relief will now be capped at an aggregate value of £1 million. Assets exceeding this threshold will receive 50% relief, leaving the remainder subject to IHT at 20% upon death. Notably, this cap and relief can also apply to assets held within trusts, exposing many estates to significant IHT liabilities.
• Employers: The increase in the employer’s National Insurance rate from 13.8% to 15% represents a significant additional cost to businesses. This could lead to reduced employee pay, hiring freezes, or even headcount reductions as businesses absorb the increased burden.
• Stamp Duty Land Tax (SDLT): Purchasers of second homes or buy-to-let properties now face an increase in the SDLT surcharge rate from 3% to 5%, effective from 31 October 2024. The immediate implementation left no time for prospective buyers to complete transactions under the previous rate.
• Inheritance Tax (IHT) for Non-Domiciled Individuals: Current non-doms with large excluded property trusts may now be subject to UK IHT on non-UK assets, reversing protections that were previously available. This is a particularly complex area, which we explore further in the following pages.

• Self-Assessment Deadline for 2023/24 Tax Year: 31st January 2025
  • Filing deadline for self-assessment tax returns for the previous tax year.
  • Self Assessments need to be filed for those earning above £150,000 or those who have investments/ property/ self-employed/ dividends.
• Tax Year End: 5th April 2025

• Pension Contribution Deadline: 5th April 2025
  • The last day to make contributions for the previous tax year.
• Annual Allowance: £60,000
  • The maximum amount you can contribute to your pension between both yourself and your employer
  • For those earning over £260,000 need to review income as may be subject to tapered pension allowance- restricting your input into pensions (lowest level is £10,000).
  • Can carry back up to three years to make use of any unused allowances

• Individual Savings Account (ISA) Year-End: 5th April 2025
  • The deadline to contribute your annual ISA allowance.
• ISA Annual Allowance: £20,000
  • The maximum amount you can save in an ISA in a tax year.
  • If you have a Lifetime ISA (LISA) then you have £4,000 allowance (this comes off of your ISA allowance).
• Personal Savings Allowance:
  • Basic rate taxpayers: £1,000 tax-free on savings income.
  • Higher rate taxpayers: £500 tax-free on savings income.