Category: Blog
Investment market update: December 2025
After a year filled with uncertainty and rising trade tensions, markets were calmer in December 2025. Find out what may have affected the performance of your portfolio at the end of the year.
Market volatility eased in December 2025
Markets were downbeat at the start of the month. Most European markets were in the red on 1 December, including Germany’s DAX (-1.2%), France’s CAC 40 (-0.55%), and the UK’s FTSE 100 (-0.13%).
The Bank of England (BoE) carried out stress tests on 2 December, which all major banks involved passed. This led to bank stocks rising, including Lloyds (1%), Barclays (0.95%), and HSBC (0.7%).
American technology firm Oracle Corporation missed its revenue forecast and hiked expenditure plans by $15 billion (£11.3 billion). This led to the company’s shares dropping by 15.7% when trading started on 11 December – knocking almost £100 billion off the company’s market capitalisation.
The news dragged down other AI stocks as well, including Nvidia, which became the biggest faller on the Dow Jones Industrial Average index after it tumbled 2.7%.
Despite the concerns about AI, the Dow Jones Industrial Average hit a record high after rising 0.95% on 11 December following news that US interest rates had fallen.
On 17 December, the FTSE 100 was up 1.6% following a bigger-than-expected drop in inflation, leading gains in European markets.
With Christmas nearing, festive optimism swept through London. On 19 December, the FTSE 100 closed at an almost record high, with leading firms including Rolls-Royce (2.7%) and precious metal producers Endeavour Mining (3.1%) and Fresnillo (2.8%). However, housebuilders and retailers suffered falls.
UK
UK inflation slowed to 3.2% in the 12 months to November 2025, according to the Office for National Statistics. The news led the BoE’s Monetary Policy Committee to vote to cut the base interest rate from 4% to 3.75%, with further cuts anticipated in 2026.
The headline GDP figure was weak in the UK. The economy unexpectedly shrank by 0.1% in October, according to official data.
In addition, UK unemployment hit a four-year high of 5.1% in the three months to October. This could signal a weakening economy.
However, forecasts suggest the economy could pick up in 2026. The Organisation for Economic Co-operation and Development (OECD) expects the UK to be the third fastest-growing economy among G7 members in 2026, falling behind only the US and Canada.
This view is supported by a return to growth in the manufacturing sector.
According to S&P Global’s Purchasing Managers’ Index, manufacturing grew for the first time in a year. The reading came ahead of the Budget, when uncertainty was likely to have been playing on the minds of businesses, so the improvement is particularly encouraging.
Sadly, it’s a different picture for retail.
The Confederation of British Industry (CBI) reported that retail volumes fell at an accelerated pace in December despite the festive season, and firms don’t expect any relief in the opening months of 2026.
Europe
The European Central Bank (ECB) opted to hold its interest rates in December as it noted that it’s on track for inflation to settle around its 2% target.
The ECB also raised its growth forecast for the economic bloc, driven by rising domestic demand. The bank now expects GDP to rise by 1.4% in 2025 and 1.2% in 2026.
An industrial recovery is likely to play a crucial role in the higher GDP forecasts. According to Eurostat data, industrial output increased by 0.8% in October as businesses benefited from trade uncertainty fading and falling energy costs.
However, not every part of the region is as optimistic.
The German Ifo Institute’s business climate index fell in December, despite analysts predicting a rise. The gloomy outlook is linked to two years of economic contraction in manufacturing, confidence in the service sector falling, and unhappy retailers facing lower-than-expected sales in the lead-up to Christmas.
US
US inflation unexpectedly fell to 2.7% in the 12 months to November 2025. Experts had predicted inflation would be 3.1%.
While falling inflation is good news for struggling families, rising unemployment could suggest further difficulties ahead. The unemployment rate hit 4.6%, amid apprehension about the strength of the US economy.
However, job growth was higher than anticipated in November. A total of 64,000 jobs were added, against the predicted 40,000.
The economic news led to the Federal Reserve cutting the base interest rate by a quarter of a percentage point. The base rate is now at its lowest point since 2022.
President Donald Trump permitted technology giant Nvidia to ship H200 chips to China in exchange for a 25% surcharge for the US. The move could allow Nvidia to win back billions of dollars in lost revenue, which led to its shares rising by 2.3% on 9 December.
While good news for Nvidia, the move has been criticised for being an “economic and national security failure” by some Democratic senators.
Asia
The International Monetary Fund (IMF) raised its growth forecast for China. The organisation now expects the country’s economy to grow by 5% in 2025 and 4.5% in 2026, thanks to lower-than-expected tariffs on Chinese exports.
However, the IMF also urged China to fix “significant” imbalances in its economy, primarily by shifting from export-led growth to domestic consumption.
The positive news from the IMF was supported by official trade data.
China’s trade surplus hit $1 trillion (£0.74 trillion) for the first time in November 2025, as the economy appeared to shrug off concerns about the impact of trade with the US. Exports grew by 5.9% year-on-year in November following a 1.1% contraction in October.
Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
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.
The salary sacrifice pension cap essentials business owners need to know
You might already know that salary sacrifice can be a practical way for your employees to bolster their retirement funds, while reducing their tax liability.
However, in the 2025 Autumn Budget, the government announced changes to how salary sacrifice is treated for National Insurance (NI) purposes.
From April 2029, a new cap will be introduced, limiting the portion of pension contributions exempt from NI to £2,000 a year.
While 2029 might seem a long way off, this is the ideal time to think carefully about how you and your business might be affected so you can be prepared.
Continue reading to discover exactly how the salary sacrifice pension cap will work, and what it means for your business’s retirement planning.
Salary sacrifice is a way for your employees to exchange a portion of their income for benefits
Salary sacrifice involves an employer and employee agreeing to a reduction in gross pay in exchange for non-cash benefits.
These might include:
- Employer-provided healthcare
- Gym memberships
- Financial advice
- Company cars (especially electric vehicles).
Perhaps the most popular non-cash benefit is pension contributions. For many other non-cash benefits (known as “benefits in kind”), tax might still be due. However, pension contributions made via salary sacrifice are typically exempt from both Income Tax and NI.
Furthermore, when your employees sacrifice a portion of their salary, you might then decide to contribute the equivalent amount to their pension. Currently, this allows you to significantly boost their retirement fund.
Moreover, as an employer, you currently benefit from not paying Class 1 secondary National Insurance contributions (NICs) – 15% in 2025/26 – on the amount sacrificed by your employee. This results in a tax saving.
However, from April 2029, the government will limit the NI efficiency on these contributions. While your employees won’t pay Income Tax on your contributions, any amount sacrificed into a pension above £2,000 a year will attract NI.
For the portion exceeding the cap, employees will pay Class 1 NICs, while you will be liable for the 15% rate.
If you’re a business owner, you might want to review your pension strategy
As a business owner, these changes to the salary sacrifice regime can affect your company’s finances and your personal tax situation.
If you pay directly into your pension from your business, or do the same for your employees, nothing will change.
However, if you currently have salary sacrifice arrangements with your employees, or use salary sacrifice to fortify your own pension, the 2029 cap means that making pension contributions will become more expensive.
As an example, every £1,000 sacrificed over the £2,000 limit by you or your employees could see your business face a £150 NI charge.
Furthermore, if you currently share the employer NIC savings with employees to top up their pots, you may need to assess how the new NI charge might affect you.
Otherwise, if your business encourages higher pension savings, you might find your company costs rise significantly in 2029.
As such, it’s worth reviewing any existing salary sacrifice arrangements and employment contracts, and then modelling how contributions exceeding £2,000 might impact your business.
After building this model, you should confirm whether contributions are through salary sacrifice or as standard employer contributions. It might even be prudent to assess your remuneration approach for any key members of staff.
While April 2029 might seem like a long time in the future, taking steps to prepare your business now could help you soften any potential blows later down the line.
It’s useful to understand how the cap might affect your employees
While your own planning is important, it’s also a good idea to consider the impact the change could have on your employees, such as seeing their take-home pay drop as their NI bills rise.
For example, an employee earning £60,000 a year and contributing 6% of their salary into their pension through salary sacrifice would have annual contributions of £3,600. Since this would exceed the £2,000 cap by £1,600, they would pay NI on this amount.
Despite the cap, it may be worth informing your employees that salary sacrifice can still be a practical way to manage their tax liability.
Indeed, the higher-rate band for Income Tax starts at £50,271 as of 2025/26. If an employee earns £50,000 and receives a 5% pay rise to £52,500, they would normally be pushed into the 40% bracket.
They could, however, sacrifice that £2,500 into their pension to remain in the basic-rate band.
Even though they would now pay NI on the £500 of the contribution above the cap (assuming they make no other pension contributions), the Income Tax savings could still make this approach financially beneficial.
It’s is important to note that if salary sacrifice is a popular perk in your business, your company might seem less attractive to the talent you wish to hire from 2029 onwards.
A capped NI benefit might deter higher-level talent, turning them towards competitors who offer a higher base salary or more generous direct pension contributions.
To stay competitive, you may want to consider paying more into your employees’ pensions rather than offering a higher salary.
Get in touch
We could help you deal with some of the tax complexities of the new salary sacrifice rules well ahead of the deadline.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. 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.
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.
Workplace pensions are regulated by The Pensions Regulator.
The Financial Conduct Authority does not regulate tax planning.
2 reasons to combine your financial plan with your partner’s
Love is in the air with Valentine’s Day just around the corner. Amid planning romantic gestures, thinking about combining your financial plan with your partner’s could be valuable.
Talking about finances might seem too practical for a day that’s about celebrating love. Yet, it could support your relationship. Here are two reasons why you might want to create a single financial plan with your partner.
1. Work towards shared goals
If you’re planning to spend the future with someone, you want to ensure you’re both on the same page about your life goals. A financial plan can help you set out what these goals are and the steps you might take to achieve them.
Mismatched goals could mean you not only miss out on achieving them, but also place pressure on your relationship.
If your priority is saving for retirement while your partner focuses on spending now, it may lead to money arguments because you have conflicting goals. A financial plan can help you have important conversations about what you’re working towards.
According to a MoneyWeek article (26 August 2025), almost three-quarters of savers say they plan to rely on their partner’s pension to help fund retirement.
If these couples haven’t spoken about how they’ll create an income in retirement, they could face a shortfall and potentially financial insecurity later in life.
In contrast, if they’ve spoken about how they’ll combine their pension savings, they could approach the milestone with greater confidence.
2. Use both of your tax allowances
Many tax allowances are for individuals. As a result, by planning together, you could reduce your combined tax bill.
For example, interest earned on savings held outside of a tax-efficient wrapper, like an ISA, could be liable for Income Tax. If you’ve used your ISA allowance, which is £20,000 in 2025/26, you could place a portion of your savings into your partner’s ISA to minimise the amount of tax you pay.
Similarly, you could pay into your partner’s pension so the contributions benefit from tax relief, if you’ve already used your own pension annual allowance.
It’s important to keep in mind what would happen if the relationship broke down after you’d placed assets in your partner’s name. You might decide it’s not the right option for you, even if it could reduce your tax bill.
If you’re married or in a civil partnership, planning together could come with other tax benefits as well.
For example, if you or your partner earns below the Personal Allowance (£12,570 in 2025/26), you may be able to transfer some of the unused amount to reduce the amount of Income Tax you pay as a couple overall.
Additionally, when you’re creating an estate plan, you can pass on assets to your spouse or civil partner without being liable for Inheritance Tax (IHT). Unused IHT allowances can also be passed to your spouse or civil partner to increase the amount they can leave to loved ones before IHT might be due.
Creating a financial plan with your partner could help improve your tax position now and in the future. However, it’s important to note that taxation can be complex, so seeking professional advice can help you understand what steps may be appropriate for you.
Your financial plan can be tailored to suit you and your partner
Combining your financial plan with your partner’s doesn’t mean that you have to merge every aspect of your finances. You can create a balance that’s right for you.
Some couples prefer to share all assets, while others are more comfortable if some assets remain theirs. You might even decide to keep hold of all your individual assets and use a financial plan to ensure you’re both working towards the same future.
A financial plan can be tailored to you and adjusted as your goals and relationship change.
Get in touch to talk about combining your financial plans
Whether you want to combine finances completely or keep some assets separate, we can help you and your partner create a financial plan that suits your relationship. Please contact us to arrange a meeting.
Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
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.
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.
7 ways financial planning could help you set realistic goals
As 2026 begins, it’s a good time to think about what you want to achieve in the coming months. A tailored financial plan can help you set realistic goals.
Creating goals on your own can be challenging, especially if they bring together several different parts of your financial plan or have a long-term time frame. If you’re overly ambitious, it can be disheartening if you don’t reach the target you’ve set. On the other hand, if you’re too cautious, you could miss out on opportunities.
Here are seven ways a financial plan could support your goals in 2026.
1. A financial plan can help you assess your starting point
A valuable aspect of a financial plan is understanding your current financial position. To assess what’s possible, you first need to know where you are.
A financial plan might involve reviewing your assets and budget so you’re in a better position to identify where changes could be made.
For example, if your goal is to retire in 10 years, you may benefit from increasing your pension contributions. By understanding where your money is going, you might find that you could reduce your day-to-day spending or divert some of your savings to your pension.
2. Your goals are at the centre of your financial plan
While managing your finances often conjures thoughts of figures and calculations, what’s really at the centre is your goals.
Working with a financial planner can create a space to explore what matters to you. Some goals might already be clearly defined, such as supporting children when they want to get on the property ladder or retiring by a set date.
However, other goals might become apparent through discussions with your financial planner, such as being in a position to overcome a financial shock or achieve peace of mind.
3. A financial plan can translate goals into numbers
Once your goals are set out, it’s time to consider what you’ll need to achieve them.
If you set a vague goal, such as “retire comfortably”, it can be difficult to assess if you’re on track.
A financial plan can help you get to grips with the numbers. So, your goal might become “to secure a retirement income of £40,000 a year”. You can then take it a step further to calculate what the size of your pension pot will need to be at retirement, and how you might need to alter current contributions.
4. A financial plan can help you balance multiple goals
Most people don’t have just one financial goal. It’s common to have several, often competing, priorities.
You might be paying off your mortgage, saving for retirement, putting money aside for your children, and hoping to go on holiday at the same time. A financial plan can bring together these different goals, so you’re able to strike the right balance between short- and long-term objectives.
5. Creating a cashflow model can help you visualise your changing wealth
One challenge of creating an effective financial plan is that you’ll usually need to consider how your finances will change over decades. It can be difficult to assess how the decisions you make today could have a positive or negative impact in the future.
A cashflow model is a tool that allows you to visualise how your wealth might change in different scenarios. For instance, you might use the model to see how adding different amounts to your investment portfolio each month will change your ability to reach your goals.
6. Working with a financial planner allows you to consider factors outside of your control
It’s not just the factors you can control that will affect the outcome of your financial plan. Sometimes, external influences, like the rate of inflation or stock market performance, might have an impact.
While you can’t know for sure what outside factors will occur, you can use a cashflow model to test different scenarios. For example, when investing, you might model several different average annual rates of return to assess what they’d mean for your goals.
This allows you to consider how your finances would cope in different scenarios, and you may be able to take steps to help ensure your goals stay on track.
7. A financial plan can create accountability
Every year, thousands of people make and break a new year’s resolution. According to a YouGov poll (17 December 2025), only 38% of people who made resolutions at the start of 2025 had kept all of them.
Working with a financial planner means you’ll have regular meetings and someone who can hold you accountable. With a clear strategy to follow, you’ll know when you’re straying from the path that could turn your goals into reality. As a result, you might be less likely to break the commitments you’ve made.
Talk to us about your goals for 2026
If your goals have changed or you’d like a review to understand whether you’re on track, please get in touch to arrange a meeting.
Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
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.
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.
The Financial Conduct Authority does not regulate cashflow modelling.