Confidence, cheese and tax

Consumer confidence has hit a 2 year high according to data firm GfK. This backs up what we hear from our Boring Money Investor Confidence tracker, which also showed people feeling more upbeat in January than they have over the last 2 years about their personal financial situation and the outlook for global markets.

Are investors right to feel confident? Despite a flat start to the year for the FTSE 100, the S&P 500 is up about 3% so far and one of the big discussion points with investors is AI and tech. This piece is worth a read for anyone wondering if it’s too late to join the AI party.

One type of fund not riding high in the popularity stakes is the sustainable fund. New data shows that the last quarter of 2023 was the first time the industry has seen more money flowing out of this sector than coming in. One main reason was the general uptake in bonds such as US Treasuries or UK gilts – you can’t really get sustainable Government bonds, so there are few options here. Other elements dampening appetite are performance challenges and investors’ frustrations with greenwashing and fudge-y claims.

Aside from markets, two other key factors which will dictate how well off we feel this year will be tax and trade.

Looking at trade first, talks with Canada have collapsed after Ottawa imposed a 245% tax on Stilton and Cheddar at the beginning of the month. They now want us to relax our ban on the import of hormone-addled beef. Hopes are high that Canadians’ love of our cheese will help Kemi Badenoch ride back into town, shouting “Alright, me lover” à la Charlie from The Traitors, and bash Trudeau back into shape with a Cheddar. But it’s not looking good. This is not the only big potential trading relationship on the skids. Over in India, we’re arguing about whisky and business visas.

With inflation keeping prices high, we need these deals to keep our imports reasonable and our exports competitive.

From trade to tax. With a budget looming in March, hopes have been high for some tax cuts but new analysis from the Treasury shows limited dosh in the pot (‘fiscal headroom’) for Jeremy to spend. About £14 billion is estimated, which is a mere drop in a Budgetary ocean.

Frozen tax thresholds mean that the majority of readers will be paying more tax than they were 12 months ago, and it’s hurting. One tool we do all have in our financial arsenal – which is brilliant at keeping the tax we pay lower – is a pension. I’ve done some posts on Instagram reminding higher-rate taxpayers to claim back the tax for any private pension payments they have made using income they’ve already paid tax on. If you don’t claim it, you don’t get it. I’ve had a few get in touch to say they didn’t know about this and have subsequently lowered their tax bills by £1000s, so do find out more if you’re unsure. This piece has various suggestions on keeping tax low if you’re a higher-rate taxpayer.

Finally – I was a guest in this week’s FT Money Clinic podcast, discussing how to manage our money between mortgage repayments, ISAs, cash, pensions and other options. It’s a juggling act and if you could use some help, I hope it’s a useful listen. You can tune in on Spotify here or read the transcript.

Have a great weekend everyone. And remember to file that self-assessment – 5 days left to go!

Holly

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