45% of high-net-worth individuals reviewed their wealth planning this year – should you?

High-net-worth individuals have been reviewing their portfolios this year, with many citing the election as a key catalyst. Should you follow their lead?

Middle-aged couple sit on sofa in front of laptop planning their finances
(Image credit: Jacob Wackerhausen via Getty Images)

There’s never a bad time to get your personal finances in order – but the election has given many the kick that they needed. 

New research from Rathbones reveals close to half of high-net-worth individuals (45%) have reviewed their wealth planning in the past year, with 20% saying it was the general election that prompted their change in plans.

When asked what changes they had made, 12% said they had brought forward gifting plans while a further 16% said they had changed the nature of their planned financial gifts

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

This suggests taxpayers are concerned about being hit by changes to inheritance tax (IHT) rules – however it is important to point out that Labour has not currently announced any plans to hike IHT rates or reduce the nil-rate band. 

As well as the election, today’s shifting macroeconomic backdrop is also front of mind for the individuals surveyed by Rathbones. Twenty-five percent said they had reviewed their financial plans due to interest rates remaining high. Another 17% reported changing their investment strategy in the past 12 months. 

"It’s encouraging to see that so many people are taking proactive steps to adapt to changes in the economic landscape," says Olly Cheng, financial planning director at Rathbones.

Interest rate cuts are expected at some point this year, with some economists betting on a change in policy when the Bank of England next meets on 1 August. When interest rates are cut, we could see a change in how different asset classes perform. 

Equities tend to do well in a falling interest rate environment, as rate cuts typically boost the economy and earnings. Meanwhile, the amount of income you can earn in the bond market could start to fall once the Bank of England shifts gear. This could mean now is a good time to lock in higher rates. 

Should you review your financial plan?

Now is a good time to review your financial plan, whether you have a few thousand in savings or a far larger sum. 

Issues like inheritance tax might sound like they only impact the ultra-wealthy, but if a single parent leaves their estate to their children (including the family home), the recipients could be forced to pay inheritance tax as soon as the value of the estate exceeds £500,000. 

To put this into context, the average house in London costs £501,880, according to the latest HM Land Registry data. 

Married spouses and civil partners wanting to leave their estate to loved ones can combine their tax-free allowances to pass on larger amounts, but not everyone is married and able to do this. 

Similarly, an unmarried person who chooses to leave their estate to someone other than a child or grandchild (or other direct descendant) won’t qualify for the residence nil-rate band. This means they can only pass on £325,000 before tax is due.

Higher interest rates were another issue raised in the Rathbones survey – and these impact all of us. Anyone with savings in the bank should be thinking about whether they are being paid a competitive rate, and whether now is a good time to fix their savings

Finally, with the UK tax burden at a record high, anyone who is saving or investing for the future should be thinking about how they can do this in the most tax-efficient way possible. Two of the simplest steps you can take include using your annual ISA allowance, if you can, and paying into your pension.

How could the election impact your finances?

One of the main ways a government can raise funds is through taxation, so it is unsurprising savers and investors are planning for a potential change in the rules after 4 July. 

Labour and the Conservatives have given some hints in their manifestos, but more measures could follow once the newly-elected Prime Minister is ensconced in Number 10. 

Tax has been wielded as a political battering ram this election season, with the Conservatives in particular accusing Labour of plans to increase taxation. However, the reality is that taxes will rise no matter who wins on 4 July

Both Labour and the Conservatives are planning to keep income tax thresholds frozen until 2028, which means many will find themselves in a higher tax bracket thanks to the effects of fiscal drag.

By 2028-2029, the Office for Budget Responsibility (OBR) estimates there will be around 3.7 million more taxpayers overall. There will also be 2.7 million more higher-rate taxpayers, and 600,000 more additional-rate taxpayers. That’s compared to a scenario where all allowances and thresholds had been indexed to inflation, and the additional rate kept at £150,000. 

At the moment, neither party is planning to hike income tax rates, National Insurance or VAT (with the Conservatives actually promising a 2p cut to National Insurance). But the next government is going to have to find more money somewhere.

The Institute for Fiscal Studies (IFS) has said that a heavier debt burden and higher spending requirements mean the next Parliament will need to either increase taxation, cut spending, or take on more national debt. 

Politicians have not been upfront about this “trilemma”, the IFS adds, accusing both parties of a “conspiracy of silence” in their manifestos. 

With this in mind, now is a good time to ensure you are making the most of the tax-free allowances currently available to you. 

That could mean topping up your ISA or your pension, or moving some cash into tax-efficient investments like Premium Bonds. It could also involve timing the sale of assets carefully to minimise capital gains tax, or gifting assets to loved ones in line with inheritance tax rules. 

The good news is that you don’t need to do all of this before polling day. Once the new government is formed, it will announce a date for the first post-election Budget. If Labour wins, as anticipated in the polls, shadow chancellor Rachel Reeves has indicated this could take place in September.

Katie Williams
Staff Writer

Katie Williams has a background in investment writing and is interested in everything to do with personal finance, investments, and financial news. Before joining the MoneyWeek team, Katie worked as an investment content specialist at Invesco EMEA, a global asset management firm, which she joined as a graduate in 2019. While there, she enjoyed translating complex topics into “easy to understand” stories. She studied English at the University of Cambridge and loves reading, writing and going to the theatre.