How to invest in 2025

In what is undoubtedly a turbulent global economic landscape, there are some areas of positivity to focus on when it comes to investing in 2025, with the World Bank expecting global growth to hold steady at 2.7% in 2025-26. This is good news for investors – especially those looking for fresh opportunities and prospective new ventures. Here’s how to invest in 2025…

What is the current UK investment landscape?

Some commentators see UK GDP growth as a little lacklustre. According to experts, the persistent discount applied across the board to UK assets combined with relative political stability has created a buyer’s market for bargain hunters, with Britvic, DS Smith, Hargreaves Lansdown and Royal Mail being snapped up by overseas bidders last year.

However, in the corporate world the picture isn’t quite so rosy. Helena Powell, director of investment management at Evelyn Partners explains, “Conversely, these dynamics are off-putting for those seeking to list and many homegrown success stories have emigrated to the US, where valuations are higher and pools of capital deeper. We have seen this with Ashtead, CRH and Flutter Entertainments.”

However, there are some UK businesses that have generated very strong long-term returns for shareholders, with recent success stories including Beazley, Compass Group and Next. The UK is still the third largest capital raising market in the world and secured its biggest IPO (Initial Public Offering) in two years in December 2024 with the French media company, Canal+.

Imminent changes to the way the UK investment market works could also offer big opportunities for investors and businesses alike this year. “The London Stock Exchange announced a number of reforms in the autumn aimed at simplifying listing rules and outlining proposals for the first ever private stock market, where investors would be allowed to trade in private companies, providing a source of capital for smaller companies that are not yet ready for a full public listing,” continues Powell.

UK stability may help investment

Relative political stability in the UK may prove to be a plus in the current tariff-driven climate as, at the time of writing, Britain has a lower US tariff rate than many other markets. This could work in its favour when it comes to investment opportunities.

Garry Packer, technical manager at Mercer & Hole, a UK-based independent chartered accountancy firm says, “Following the October 2024 budget, those with surplus investment funds have a degree of certainty about near-term key tax changes and how this might impact wealth planning and investment strategies, so they should be able to make decisions with greater confidence.”
 
The new Foreign Income and Gains (FIG) regime also presents an opportunity for those looking to come to the UK and UK citizens who have lived outside the UK for the last 10 years.

Investment opportunities in 2025

Undergoing what seems to be a possible seismic change, the global economic pathway may be affecting financial markets. Stocks could be under pressure, particularly those that have driven market performance in recent years, such as the Magnificent 7 (including Apple, Microsoft, Nvidia and Amazon).

However, for long term investors this can also present an opportunity to tuck away high quality companies at cheaper prices, making investment an attractive prospect this year.
“Relatively safe assets will also be a useful place to hide out while equity markets remain volatile,” says Powell. “UK gilts offer a guaranteed return to maturity and are a highly tax efficient way to hold cash if you opt for those with a low interest coupon, as the majority of the return is then tax-free capital gain.”

Generally, experts say that pensions remain the most tax-efficient way to save money for retirement and the flexibility of modern pension schemes make them more appealing. For those with land and business investments, changes to Agricultural Property Relief and Business Property Relief, which come into force from 6 April 2026, need to be considered as they could impact on both succession plans and inheritance tax planning.

“Investors need to think about what their longer-term goals are for their wealth,” explains Packer. “If they want to pass it on to future generations then using some of the tax efficient structures available, such as trusts, could help them to do this.”

How can investors mitigate risk?

It seems likely that financial markets are going to experience some volatility in the near term, with the impact of uncertain US trade policy remaining a key area for concern. This instability makes it much harder for companies to make long-term decisions, so having a balance of different investments in solid choices such as gold and government bonds seems a smart move.

It could also pay to be cautious about cryptocurrency investment. Typically seen as the ultimate risk asset, it has done well in buoyant markets but has the potential to be unpredictable.

Powell advises, “On a long-term view, cryptocurrency is becoming increasingly mainstream and institutional investors are including allocations to digital assets in portfolios, so it could be worth holding in small quantities, alongside a range of other investments, unless you have an extremely high threshold for volatility!”

Reviewing your investment strategy in terms of your pension funds may also be helpful. Pension funds are not currently subject to inheritance tax (IHT), so long-term growth is likely to be a major aim. However, there are some changes coming up in this area.

“Pension funds are due to become subject to IHT from 6 April 2027,” explains Parker. “This could mean investors begin making withdrawals from them [ahead of this]. It might therefore be prudent to consider putting a more income-focused investment strategy in place.”

The investment outlook for 2025-2026

As ever, working out your capacity and tolerance for risk will help you shape a streamlined and efficient investment strategy. “Make sure you hold companies that are financially resilient with cash generative, low-debt elements and high margins,” says Powell. “These will be best placed to weather any potential storms ahead and absorb the impact of tariffs without being forced to raise prices too much.”

Ensuring pensions are part of the picture may also help. “Despite the fact that pension funds are expected to become subject to IHT, they still remain fantastic lifetime-income savings vehicles,” explains Parker. “Investors should not shy away from making pension contributions.”

All investments carry risk, so speaking to an advisor about long-term plans will bring clarity and help structure investments in the most tax-efficient way. Keep your long-term financial goals in mind and seek advice if you’re unsure or if your circumstances have changed.

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