What did 2025 bring to the UK’s financial landscape?

Looking back over the calendar year is always interesting. Events that seemed all-consuming at the time can be quickly overtaken by another headline. Financial peaks become eclipsed by lows, which then surge back into highs.

Reflecting on the whole year can offer a sense of perspective, an insight into how markets that seem volatile at the time soon smooth into calmer waters.

Here, we’ll take a financial trip through 2025, looking at what caused ripples, what made waves, what felt like a tsunami, and what we can learn from the past 12 months.

Q1: January to March

Casting our minds back to the first quarter of the year, it was a nice, steady start for the UK. Although inflation stood above the 2% target, hovering in the 3-4% range, it was nonetheless well below the rates seen back in 2022/23.

The economy also seemed to defy expectations, with the Guardian reporting a Gross Domestic Product (GDP) increase of 0.7% in the first quarter of the year, staving off a predicted recession.

However, the gloomy predictions had dented consumer confidence, which Nielsen IQ reported had fallen by five points to -22 in January.

The Spring Statement saw the usual flurry of rumour and speculation beforehand, but there were no immediate changes to pensions or major tax increases.

Ultimately, it was a fairly unexciting but steady start to the year. However, the next quarter brought plenty of drama.

Q2: April to June

This quarter was dominated by President Trump’s shock trade tariff announcement on 2 April, a date he dubbed “Liberation Day”.

In a major shift in US trade policy, the tariffs triggered global shockwaves, with China swiftly retaliating with its own set of tariffs.

The markets reacted sharply, with AP News reporting that the S&P 500 dropped by 6%, its worst week since March 2020.

The Dow Jones fell by 5.5%, and the Nasdaq plummeted 5.8%.

Market volatility quickly followed, with global equities, including UK markets, dropping significantly. Media headlines predicted a new worldwide trade war.

Thankfully, however, this didn’t come to pass. The US swiftly announced a 90-day pause on tariff increases, and the markets responded positively to the news.

It was a real rollercoaster for investors, and a classic example of how volatility can strike, cause chaos, and then quickly abate.

This strengthens the long-held position that investments are generally better left to spend “time in the market” rather than trying to “time the market”.

Q3: July to September

Following the lows and highs of the tariff repercussions, this quarter was fairly unremarkable, possibly best summed up by the word “sluggish”.

Inflation proved stubborn, at just over 4%, and consumer spending remained cautious. It was something of a limbo, with no real dramas or crises, but equally no big boom.

Q4: October to December

The big news was the Autumn Budget, with rumour and speculation running rife in the weeks leading up to the chancellor’s announcement.

On the day, the Office for Budget Responsibility (OBR) inadvertently released a key document ahead of the Budget, an error which ultimately led to the OBR chair resigning. The early publication meant the media had access to the Budget before Rachel Reeves began speaking.

Key takeaways from the Budget were:

• • Income Tax thresholds frozen for a further three years, and Inheritance Tax (IHT) thresholds also frozen, both now extended until 2031. This won’t lead to a direct increase in your Income Tax or IHT liability, but is known as “fiscal drag” – where more of your income or wealth is likely to be exposed to tax.
  • The Individual Savings Account (ISA) allowance is changing for under-65s. From April 2027, only £12,000 can be paid into a Cash ISA each tax year. The remainder of your £20,000 ISA allowance will need to be invested in a Stocks and Shares ISA. However, you can still invest your full allowance into a Stocks and Shares ISA. If you’re over 65, you can continue to put up to £20,000 in a Cash ISA each year.
  • Salary sacrifice on pension contributions will be capped at £2,000, with employer and employee National Insurance contributions (NICs) charged above this amount from April 2029.
  • A new “mansion tax” is to be applied to high-value properties, with surcharges on properties valued over £2 million.
  • An Electric Vehicle Excise Duty (eVED) will be 3p per mile for battery electric cars and 1.5p per mile for plug-in hybrids, and will come into effect from 2028.

As we end the year, inflation has eased a little, hovering at 3.6% in the 12 months to October. The markets have calmed after their earlier volatility, and in spite of the turmoil, investors have proven wise to rise above the noise.

Looking back on the year can be a good exercise in showing us that we simply can’t predict what’s in store.

The shock of the tariff announcements is a perfect case in point. We can use this information to guide future behaviours, to see that volatility is normal, and that panic is rarely a useful response.

What will our 2026 review bring? Watch this space.

Get in touch

While we can’t predict the future, we do understand the behaviours of the markets and the approaches investors can take. If you’d like to talk to us about creating, updating, or reviewing your financial strategy, we’ll be very happy to help.

Please email us at info@harperlees.co.uk or call 01277 350560 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients 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 Financial Conduct Authority does not regulate estate planning or tax planning.