Ups and downs

Pretty much everything is up this week apart from the temperature. I went for a swim in the sea at 7.30 this morning and I’m not quite sure if I’m writing this from the afterlife. I don’t think I died, but it was quite cold!!!

First up, the tax we pay has increased. If you had any doubt about the seemingly innocuous plan to ‘freeze tax thresholds’, new Government data shows the impact on us in £ terms.

Income Tax, Capital Gains and National Insurance receipts for April 2024 to October 2024 were £260 billion – over £6.4 billion higher than the same time last year. As for Inheritance Tax, the Government took in £5 billion during this 6-month period, £0.5 billion more than this time last year. And this will keep creeping up. Anyone earning around £12,000, £50,000 or £125,000 a year (N.B. different in Scotland) should take particular note of the thresholds – more people will creep over into higher bands over the coming months. Pensions are your weapon here and can reduce your taxable income, keeping you under a threshold as your earnings increase. You can learn more about this pensions manoeuvre (also handy for parents earning between £60,000 and £80,000, who will progressively lose child benefit).

Our energy bills are also set to rise. The energy regulator Ofgem has confirmed a 1.2% increase in the price cap from January to March next year. This will see bills rise by an average of £21 a year. The average household paying by direct debt for dual fuel will pay £1,738 a year. It’s interesting to remember that, according to Ofgem, during the energy crisis of January to March 2023, this average bill was £2,321 a year.

Not to be outdone, the stock market has also been on the march. This week has been another decent showing for most main markets and the continued rise means the S&P 500 is up about 23% so far in 2024.

And finally, inflation is also up. Last week we learned that US inflation was up to 2.6% in October. And forecasts from the Bank of England released this month show it expects higher inflation in the short term, dampening hopes for continued strong rate cuts. The Bank thinks that consumer price inflation will be running at 2.7% at the end of 2025, higher than previously estimated. With wage inflation a key input, the employer response to National Insurance hikes will be important, as economists wait to see whether employers react to this by lowering wage increases, laying off staff, putting up prices or a combination of all three.

To buck the trend, two things are down this week.

One is the mood around the prospects for future wage increases. In October, the three-month average for expected year-ahead wage growth was 4.1%. As mentioned, the Bank of England will be watching very carefully to see if tax hikes bring this down as we move into 2025. 

The other was the mood in Hargreaves Lansdown as news came that RGL Management filed on behalf of over 2,000 new claimants in the High Court claim against Hargreaves Lansdown, over the collapse of the Woodford fund back in 2019. I’ve had questions from some concerned readers on this and have written an update.

I’ll end with a short note about AI. As Nvidia remains primary spot as the second most traded share on Hargreaves Lansdown this week, and is pushing up against its 52-week high. On Wednesday night I went to a mind-bending talk on AI and Intimacy. Oh yes. Replika is a company which connects us with AI friends to talk to. I created an AI friend, but he looked like a gorky teenager and the only thing I could image saying to him would be “Come for supper and get off your phone”. Blush is a dating app where you can talk to, flirt with and go on virtual dates with AI chatbot characters. Who are all set to tell you how damn amazing you are. And we also met an android doll combined with animatronics and artificial intelligence, with sliders to control things like intelligence and obedience. Flaming Nora. It’s all heading our way, people.

Finally - if you have a spare 2 minutes, we're launching the voting for our 2025 Consumer Choice Award today, to recognise our readers’ favourite investment platform. We will be doing our annual deep dive and crunching the numbers at Boring HQ too – but we want to know what YOU think. You can vote here.

Have a great weekend everyone,

Holly

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