Comet Wealth

Protecting What Matters Most

Click here to download your copy of ‘Financial protection for you and your family’.

Our full range of Key Guides can be found at:
cometwealth.uk/resources/key-guides

.

Each day, month and year brings a fresh wave of predictions about which markets, sectors, or asset classes will outperform. Financial headlines continue to highlight the latest themes – whether it’s the rise of AI-driven companies, the growing adoption of cryptocurrencies, or the apparent resurgence of gold as a safe haven asset. Despite the persuasive narratives, investors should remain cautious about reorienting their portfolios based solely on these forecasts. As history has shown, economies and markets are inherently unpredictable.

Each year, the leading and lagging sectors shift in surprising ways, defying attempts to consistently identify winners ahead of time. For example, recent years have seen technology stocks oscillate between market leader and underperformer. Such volatility highlights the challenges of relying on past trends as a guide for future decisions. Note that a diversified exposure to all of these sectors provides investors with a smoother journey through time, and the confidence that one can benefit from the sector that dominates in future. See figure 1 on the next page. 

It’s important to recognise that even sophisticated investors, equipped with vast amounts of data and analysis, rarely succeed in consistently outguessing the market. Recently published results showed that in the 10 years to the middle of 2025, 97% of professional UK-based global fund managers have failed on their promise to deliver above market returns. This is a damning result¹.

Unforeseen events – geopolitical shocks, policy changes, or sudden shifts in consumer behaviour – are swiftly reflected in stock prices, making it nearly impossible to anticipate every twist and turn.

Ultimately, while it is tempting to adjust investment strategies in response to compelling forecasts or recent performance, a disciplined, long-term approach remains the most prudent path. Figure 1, above, shows the randomness inherent in markets and the risks of chasing yesterday’s winners. As always, investors should focus on diversification and their long-term objectives rather than being swayed by short-term trends. 

The only function of economic forecasting is to make astrology look respectable

Ezra Soloman, Economist

Reference
1) S&P Global: SPIVA Europe Mid-Year 2025. GBP-denominated funds, ‘Global Equity’ category. For reference, other categories did not show any material improvement in results (‘Europe Equity’: 88%, ‘UK Equity’: 87%, ‘Emerging Markets’: 88%).

HMRC figures for 2023/24 show cash ISA subscriptions have increased by around 224% more than stocks and shares ISAs by the end of the decade.  

The Chancellor’s plan to reform individual savings accounts (ISAs) to “improve returns for savers” has been considered for some time. Rachel Reeves’s scheme is widely believed to mean the current £20,000-a-tax-year subscription limit for ISAs would be reduced for cash ISAs. Unsurprisingly, the investment management industry has been in favour of such a move, while the big banks and the Building Societies Association have been strongly against it.

Statistics published by HMRC in September cast a new light on the ISA debate. The data show that in 2023/24, subscriptions to cash ISAs were £69.5 billion, while stocks and shares ISAs attracted just over £31 billion. That brought the total amount invested in cash ISAs to £360 billion as of April 2024. It would be reasonable to assume the total now is well above £400 billion. 

Now put yourself in the Chancellor’s shoes. If the Bank of England had £400 billion earnings and 4% Bank Rate, it would mean £16 billion of interest on which no income tax is being collected. The latest estimate from HMRC is that the cost of income tax and capital gains tax relief for ISAs was £9.4 billion in 2024/25, almost a fifth up on the previous year. Cutting back on the amount flowing into cash ISAs could reduce tax loss, even though the prospect of enhanced returns is a better story to present to the public.

To be fair to the Chancellor, there is some justification in her argument. As HMRC’s ISA Investment values and subscriptions graph illustrates, to a degree, the total value of stocks and shares ISAs grew more rapidly than cash ISAs over the ten years to April 2024. However, cash ISAs saw little net inflow for much of the period. It is easy to forget now that the Bank of England rate was no more than 1% between February 2009 and June 2022, assuring miserable returns for money held on deposit.

Before you rush to arrange a pre-Budget cash ISA, it is worth reflecting on what you are trying to achieve. If you just want to move a ready money deposit to a tax shelter, remember that unless you are an additional/top rate taxpayer, the personal savings allowance (PSA) covers up to £200 of tax on interest (20% for basic rate x £1,000 PSA or 40% higher rate x £500 PSA).

If you are setting aside money for long-term growth, then, as the Chancellor suggests, there could be better options. 

Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
The value of the investment and the income from it can fall as well as rise and investors may not get back what they originally invested, even taking into account the tax benefits.
Investors do not pay any personal tax on income or gains, but ISAs may pay unrecoverable tax on income from stocks and shares received by the ISA managers.
Stocks and Shares ISAs invest in corporate bonds, stocks and shares and other assets that fluctuate in value.
Tax treatment varies according to individual circumstances and is subject to change.
The Financial Conduct Authority does not regulate tax advice.

Nine months into 2025, investment performance may not be what you expect.

The daily blog from Financial Times, FT Alphaville, runs a competition every Friday for a trivial prize, such as a T-shirt. The quiz typically involves a trio of graphs with the same question applied to each one: what is being plotted? The answers are usually esoteric: two recent examples were an Argentinian government bond and two classes of debt from First Brands, a US car parts provider that had recently – and spectacularly – failed. 

The graph above is more straightforward than FT Alphaville’s offerings. It shows for the first nine months of 2025:

• The price of a gold exchange traded fund (ETF),
• The price of a FTSE 100 ETF, with dividend income reinvested, and
• The price of an ETF linked to the S&P 500, the main US stock market, again with dividend income reinvested.

For consistency, the ETFs are all from the same provider, priced in US dollars and rebased to 100 at the end of 2024. Your challenge is simple: which is which? 

The answer is that the top performer (?) at the end of the third quarter of 2025 was the gold ETF (+47.0%). Second (??) was the FTSE 100 ETF (+18.9%), and bringing up the rear (???) was the S&P 500 ETF (+13.1%). If you are surprised that the US takes the wooden spoon, you are probably not alone. 

There are plenty of ways of explaining what has happened, but arguably they can be explained with a single word: dollar. In 2025, the shine has come off the US currency. Global investors have been unsettled by an environment in which tariffs of 25% or more can suddenly appear from a weekend message on Truth Social, Donald Trump’s social media company. As a result, there has been selling of the dollar or, for foreign owners of US shares, currency hedging against the dollar’s fall. Central bankers have also been less enthusiastic about holding the dollar in their reserves and instead have been paying more attention to – and buying – gold.

For private investors, the message is that currency still matters and that, although the US stock market has been regularly hitting new highs, the benefits for investors outside the US have been watered down by the weakening dollar.  

Tax treatment varies according to individual circumstances and is subject to change. The Financial Conduct Authority does not regulate tax advice.

HMRC’s latest statistics show a jump in unclaimed Child Trust Funds (CTFs) to over £1,500,000,000. 

CTFs had only a brief existence. They were launched in January 2005 by the previous Labour government and survived for just six years, before being culled by the Conservative /LibDem coalition government in 2011, shortly after it came to power. While the main reason for their demise was financial, it was also a fact that CTFs failed to capture the public imagination. Over a quarter of CTFs were opened by HMRC under a default process after parents or guardians had failed to act.

The government paid £2 billion into accounts for 6.3 million children born between 1 September 2002 and 2 January 2011, to which parents and others could add a top-up, initially of no more than £1,200 a year. This has since risen to up to £9,000 a year. In reality, most CTFs were funded with a single government payment of around £250, with a second £250 if the child reached age seven before 3 January 2011, when the government funding ended (although CTFs continued to exist).

Those payments took the form of a voucher, sent to the child’s parent or guardian, and were frequently ignored – leading to a high proportion of HMRC-opened CTFs. With hindsight, the default rate was an omen of the potential problems that would arise when CTFs matured at age 18. 

The latest report from HMRC shows that as at 5 April 2025, there were 758,000 matured CTFs not claimed or transferred, over 60% of which had matured more than a year previously. The average value of the unclaimed plans was around £2,000, but some 27,000 plans had a worth of £10,000 or more.

To trace a CTF, the first port of call is the HMRC locator tool that can supply the name of the CTF provider, but not the CTF’s value.

A matured CTF enjoys the same tax freedom as ISAs beyond age 18. However, if continued investment is the goal, it still makes sense to review the option of a transfer to a new ISA, which will probably offer a greater investment choice and potentially have lower charges. 

Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances
The value of the investment and the income from it can fall as well as rise and investors may not get back what they originally invested, even taking into account the tax benefits.
Investors do not pay any personal tax on income or gains, but ISAs may pay unrecoverable tax on income from stocks and shares received by the ISA managers.
Stocks and Shares ISAs invest in corporate bonds, stocks and shares and other assets that fluctuate in value.
Tax treatment varies according to individual circumstances and is subject to change.
The Financial Conduct Authority does not regulate tax advice.

By clicking on one of these links you are departing from the regulatory site of Comet Wealth. Comet Wealth is  not responsible for the accuracy of the information contained within the linked site.

A new report has shown conflicting ideas about retirement.         

The report included two questions:

• Question 1: At what age would you like to retire?
• Question 2: At what age do you think you will be able to retire?

If your answers to those two questions are different, then you are not alone. The report found that the average answer to question 1 was 62.3 years old, while for question 2 it was 67.0, a gap of nearly half a decade. The difference was just 0.9 years for baby boomers – those closest to retirement age – and widest at 6 years for millennials (born early 1980s to late 1990s). Perhaps surprisingly, Generation Z (born 1997–2012), had both the earliest aspirational retirement age (60.1) and the earliest expected age (65.0).

Gen Z’s expected retirement age of 65 – five years below the baby boomers’ expectation – seems optimistic at best. At the earliest, Gen Z will not reach the current state pension age (SPA) of 66 until 2063. The SPA is set to rise to 67 by 2028, and this summer the government set in train a review for the move to SPA 68 – the law currently has the change set for 2046–48. So, it is possible that further reviews mean some of Gen Z may not start to receive their state pension until age 70.

The responses to another question in the report, about working beyond SPA, further muddied the waters of Gen Z’s aspirations about retirement age. Just over half of people aged between 18 and 34 in employment agreed with the statement “I’m expecting to have to continue to work beyond my State Pension Age”.

One possible way to square these contradictions can be found in Gen Z’s pessimism about the future of the state pension. 45% of Gen Z said that they do not expect the state pension will be available for everyone by the time they reach their SPA. 

Gen Z’s apparent retirement inconsistency is not unusual. If you are unsure how your retirement plans fit together, the best answer to your questions is to take advice. 

The value of your investment and the income from it can fall as well as rise and investors may not get back what they originally invested.

HMRC is sending out letters asking taxpayers to check their dividend totals. 

You may have received something that starts like this:

“Dear XX

Please make sure your tax return included all your dividend income.

We’re writing to ask you to check your self assessment tax return for the year ended 5 April 2024. This needs to include all your dividend income from shares in UK companies.

We’ve seen quite a few mistakes in this area on tax returns, and we want to help you get this right. This letter isn’t a compliance check.

If you’ve told us you have an adviser, we’ve also written to them.”

So opens HMRC’s letter issued to a number of self assessment taxpayers. The fact that the document specifically says it is not a compliance check does not mean it can be ignored, although it indicates that HMRC probably have no relevant information. 

The tax year covered is 2023/24, one for which most returns will have been sent back to HMRC by January 2025. 2023/24 was the first of two tax years in which the dividend allowance halved, going from £2,000 in 2022/23 to £1,000 in 2023/24 and subsequently to its current level of just £500. 

When the cuts to the allowance were announced in the Autumn Statement 2022, HMRC estimated that about 3.2 million people would be affected in 2023/24, increasing to 4.4 million in 2024/25 (nearly three-quarters of all dividend recipients). The correspondence suggests that HMRC are not seeing the numbers that had been anticipated.

One problem for HMRC is that while there is an automatic system for banks and building societies to report interest paid, no such mechanism exists (yet) for dividends. This is likely historical – basic rate taxpayers generally had no tax to pay on dividends, a situation which continued when dividend tax credits were replaced by the dividend allowance (at the initial level of £5,000) in April 2016. 

If you receive the HMRC dividend letter, make sure that your reported 2023/24 dividend totals are correct and, if not, you or your adviser should either amend your online tax return or write to HMRC by 31 January 2026. 

If you find keeping track of dividends difficult, then consider a review of the way in which you hold your investments. 

Tax treatment varies according to individual circumstances and is subject to change.
The Financial Conduct Authority does not regulate tax advice.

The complex world of tax on investment

The UK tax system has grown increasingly elaborate, thanks to revenue-raising tweaks such as the freezing of many elements and multiple reforms of dividend taxation. With more changes possible in the coming Autumn Budget – even after last year’s £40 billion of Budget tax rises – the complexities are only likely to increase. This guide offers a brief outline of how your investments are currently taxed and future changes (or freezes) that have already been announced, including those set out in the 2024 Autumn Budget. The Covid-19 pandemic and 2022 energy price spike both hit government finances hard and ever since, successive Chancellors (and their Scottish counterparts) have been taking significant steps to raise revenue. As result: 

• Many personal tax allowances and bands are now frozen until April 2028, despite inflation having peaked at over 11% in October 2022, in the first tax year of the freeze.
• There was a six percentage point jump in the main rate of corporation tax from April 2023.
• Since April 2023, the starting point for additional rate tax (top rate in Scotland) has been £125,140, nearly £25,000 below the previous (frozen) level.
• In Scotland a further 1% was added to the higher and top rates from 2023/24 and another 1% to top rate in 2024/25, taking them to 42% and 48%. Scotland also saw the introduction of a new 45% ‘advanced rate’ of tax for income between £75,000 and £125,400 in 2024/25.
• The taxation of dividends is now much less generous than when the current structure was introduced in 2016/17.
• Following the Autumn Budget 2024, the tax burden is on course to reach 38.2% of GDP by 2029/30, its highest since 1948 and over five percentage points above the pre-pandemic figure.

Expert advice is necessary if you require more information or a greater insight into how to cut your share of the growing tax burden.

Please note that all examples included in this guide are fictitious.

Click here to download your copy of ‘Investing tax efficiently’.

Our full range of Key Guides can be found at:
cometwealth.uk/resources/key-guides

This publication is for general information and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication. The Financial Conduct Authority (FCA) does not regulate tax advice, so it is outside the investment protection rules of the Financial Services and Markets Act and the Financial Services Compensation Scheme. This publication represents our understanding of the law and HM Revenue & Customs practice as at 16 July 2025.

The former Deputy Prime Minister Angela Rayner’s recent problems with stamp duty land tax (SDLT) offer a salutary lesson.   

In early September, the Deputy Prime Minister (and Housing Secretary) resigned after discovering that she had underpaid SDLT by £40,000 on the purchase of a flat in Hove.

That Rayner missed the history of the additional tax liability was unfortunately ironic. The surcharge on stamp duty was introduced by Conservative Chancellor, George Osborne, in the Autumn Statement 2015, at a rate of 3%. It took effect from April 2016 and the rate was subsequently increased to 5% nine years later in the Autumn Budget presented by Angela Rayner’s then cabinet colleague, Rachel Reeves.    

The tax aimed to discourage buy-to-let and second home purchasers, who were often shopping for similar properties to first-time buyers in a pressured housing market. The basis of the additional tax required the buyer to pay extra SDLT if they owned another residential property on the same day that another property was bought. That might sound simple enough, but the legislation to achieve it was not, involving the closure of potential loopholes, such as buying the second property through a company or using trusts to shift ownership. 

It was the latter anti-avoidance measure which tripped up Angela Rayner. She had sold the 25% interest in her first home, in Ashton-under-Lyne, to a trust for the benefit of her disabled child before buying her Hove apartment. Paragraph 12 of Schedule 4ZA of the Finance Act 2003 deemed that such a sale meant that Rayner was still treated as owning the property for SDLT purposes.

While Rayner had sought guidance on her SDLT position, the advice she received was qualified by the acknowledgement that it did not constitute expert tax advice and was accompanied by a suggestion, or in one case a recommendation, that specific tax advice be obtained. Had Rayner paid heed to those warnings, she would not now be facing a potential tax penalty of up to £12,000 for ‘carelessness’, in addition to the £40,000 extra SDLT.

The lesson of the whole episode and one to keep in mind whenever advice – particularly in the financial area – is needed: make sure you are talking to an expert who stands behind their judgement. 

The Financial Conduct Authority does not regulate tax advice.

Are you considering drawing a lump sum from your pension before the Autumn Budget?

One of the major tax benefits of saving through pensions is that, generally, 25% of the pension’s value can be drawn as a lump sum, free of income tax, up to a maximum of £268,275. From the point of view of the law, that cash is defined as a pension commencement lump sum (PCLS) which, as the name suggests, must be taken at the same time pension income starts to be drawn. In practice, the level of regular income taken can be nil and the lump sum (and accompanying income) may be drawn in stages; there is no statutory requirement for your pension pot to be converted to cash and income all at once. 

The future of the PCLS is a staple of pre-Budget rumours. Forty years ago, one of Chancellor Rachel Reeves’ distant predecessors, Nigel Lawson, teased about “the anomalous but much-loved tax-free lump sum” in his Budget speech, but made no changes. In the run-up to the Autumn 2024 Budget, the fate of the PCLS was subject to more than usual speculation, given that substantial extra revenue needed to be found. However, Reeves also left the PCLS unchanged.  

A recent response to a Freedom of Information request revealed the public has been taking the risk of an attack on the PCLS seriously: 

• In the six months to March 2025, over £10.4 billion was drawn as PCLS, more than a third above the level of the previous six months and nearly three-quarters higher than the total drawn in the half year to March 2024.
• Over the entire 2024/25 financial year, the amount of PCLS withdrawn was 61% up on 2023/24. However, the number of savers making those withdrawals rose by only 29%, suggesting that the average PCLS taken was almost a quarter larger.

There is some evidence after last year’s Budget that some of those taking their PCLS regretted their actions. HMRC had to remind pension providers that “The payment of a tax-free lump sum cannot be undone.” 

At this stage, nobody knows what the Budget will bring (or take away), but if you are thinking of drawing a PCLS now, make sure you also take advice before reaching a final decision.  

Tax treatment varies according to individual circumstances and is subject to change. The Financial Conduct Authority does not regulate tax advice.