Blog Archives - E S Walton

Investment market update: May 2026

There were highs and dips in the investment markets in May 2026. Discover some of the factors that may have affected your portfolio’s performance.

Remember, short-term market movements are a normal part of investing. When you’re reviewing returns, it’s typically a good idea to look at the bigger picture and assess performance over several years.

Ongoing conflict continued to affect markets in May 2026

On 1 May, US President Donald Trump announced he would lift tariffs on Scotch whisky following a state visit from King Charles. The news led to drinks maker Diageo being among the biggest risers on the FTSE 100 – an index of the largest companies listed on the London Stock Exchange – after shares were up 2% in early trading.

Banking giant HSBC suffered a drop of more than 5% when trading opened on 5 May. It was the biggest faller on the FTSE 100 after the bank reported a drop in profits and a $400 million (£298 million) fraud-related loss in the UK.

Hopes of a peace deal between the US and Iran led to investor optimism on 6 May.

Trump announced there was “great progress” towards an agreement, which buoyed markets, particularly in Asia. South Korea’s leading index, the Kospi, was up 8% and broke through the 7,000-point mark for the first time. Samsung Electronics experienced a jump of 15%, which took the company’s market value above $1 trillion (£0.75 trillion).

More broadly, MSCI’s All-Country World Index was up 0.56% to reach a new record.

For many markets, the positive news continued on 7 May. Japan’s Nikkei index was up more than 5.5% and closed on a new high. Indices in Germany, France, and the US also rose. However, the UK lagged, with the FTSE 100 falling by 0.55%.

Anticipation of higher inflation due to rising oil prices led to the FTSE 100 slipping further on 15 May, with mining and utility stocks particularly affected. The index fell to its lowest level since the end of March 2026.

On 22 May, US stocks opened higher with the S&P 500 index up 0.4% and the technology-focused Nasdaq also up 0.4%. US cosmetics giant Estée Lauder’s shares were up 11% after it ended merger talks with Spanish rival Puig.

UK

Overall, economic data released by the UK’s Office for National Statistics (ONS) was positive.

First, the UK economy beat GDP forecasts in March. The economy grew 0.3% month-on-month to deliver 0.6% growth in the first quarter of the year. News from the construction sector was particularly encouraging. After falling in the second half of 2025, the sector increased by 1.5% in March.

Official data also suggests inflationary pressures are easing. In the 12 months to April, inflation was 2.8% compared to 3.3% a month earlier. The dip is largely due to electricity and gas prices falling.

However, the conflict in Iran is expected to have an impact on business operations.

S&P Global’s Purchasing Managers’ Index (PMI) found that manufacturing businesses’ costs are surging because of the conflict in the Middle East. Indeed, the prices of raw materials, energy, and labour rose at one of the fastest paces since the survey began in 1992, outside of the post-pandemic inflation surge in 2022.

In addition, the forecasting group ITEM Club predicts the UK economy will lose 162,000 jobs in 2026 amid the conflict involving Iran.

One company that has benefited from the conflict is the oil and gas company Shell. The company revealed profits more than doubled quarter-on-quarter in the first three months of the year. Reported profits of $6.9 billion ($=£5.15 billion) for the first quarter of 2026 have attracted some criticism.

Despite many retail businesses struggling, there was positive news from clothing retailer Next. The firm revealed far stronger sales than expected in the three months to April 2026. Sales were up 4.4% compared to the 1.3% predicted.

In contrast, carmaker Jaguar Land Rover reported a sharp dip in profits. Britain’s largest carmaker only made £14 million in profit before tax in the year to March 2026. That’s a slump of more than 99% when compared to the £2.5 billion reported a year earlier. The company was affected by US trade tariffs and a cyber-attack that disrupted factories for months.

Europe

According to the European Central Bank (ECB), both the eurozone and wider European Union posted subdued economic growth of 0.1% in March.

In addition, the ECB data suggests inflation is rising across the economic bloc. In the 12 months to April 2026, inflation was 3% – an increase of 0.4% when compared to a month earlier.

A PMI reading also indicates that the service sector in the eurozone shrank in April for the first time in almost a year. The reading was 47.6, with a number below 50 suggesting contraction. The decline was linked to the effect of the conflict in the Middle East.

US

The US also experienced higher inflation. According to the Bureau of Labor Statistics, in the 12 months to April, inflation was 3.8% after a month-on-month increase of 0.6%. The data could make it difficult for the US central bank to cut interest rates, despite pressure to do so from Trump.

There was positive news for the economy in the job data. Official figures suggest 115,000 jobs were added to the economy in April, beating forecasts of 62,000.

However, outplacement firm Challenger, Gray & Christmas warned that job cuts were up 38% month-on-month in April, with AI driving layoffs.

Asia

China’s National Bureau of Statistics (NBS) reported factory output slowed to 4.1% year-on-year in April. The weakening economic data comes despite a jump in exports, as customers tried to stockpile goods to avoid supply disruptions due to the conflict.

In addition, the NBS reported China’s producer price inflation rose to a 45-month high of 2.8% in April due to higher energy prices. The increase could affect profit margins and may suggest challenges ahead for Chinese producers.

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.

Why earning more than £100,000 doesn’t have to mean falling into a tax trap

A hidden marginal tax rate that affects workers earning between £100,000 and £125,140 is often dubbed a “tax trap”, and research suggests it’s shaping career decisions. However, there are ways you might mitigate the additional tax charge without putting the brakes on your career progression.

The Personal Allowance is £12,570 in 2026/27, and you can usually earn this amount before Income Tax is due.

However, the Personal Allowance starts to taper if your earnings exceed £100,000. For every £2 that your income exceeds this threshold, your Personal Allowance is reduced by £1. You lose your Personal Allowance completely once your annual income reaches £125,140. In effect, this means you could pay tax at a rate of 60% on this portion of your income.

As Income Tax allowances and thresholds are currently frozen until April 2031, more people could find they face this hidden higher rate of tax.

In addition, if your income exceeds £100,000, you could lose childcare benefits. So, families with young children may be doubly affected if their income exceeds the threshold.

The tax trap could affect career decisions

According to an article in FT Adviser (22 April 2026), the implications of the 60% tax trap have affected how some workers view career progression opportunities.

A poll of 1,000 workers earning between £90,000 and £125,000 at one company found that as a result of the tax trap:

28% had turned down a promotion
26% refused a bonus
24% declined a pay rise.

While the above could seem like a sensible approach from a tax perspective, it’s a short-term view. Turning down a promotion now could limit your long-term prospects and earning potential.

In some cases, there might be steps you can take to reduce your overall Income Tax bill. This could allow you to pursue new career challenges while avoiding an effective tax rate of 60%.

3 ways you might avoid the 60% tax trap

1. Increase your pension contributions

Topping up your pension could reduce the amount of Income Tax you pay and improve your income in retirement.

Your Income Tax liability is calculated after pension deductions, so it could be a useful way to keep your taxable income under the £100,000 threshold. In addition, pension contributions typically benefit from tax relief at your marginal rate, so your pension will be boosted even further.

In some cases, your employer may increase the sum they contribute to your pension when you do.

Keep in mind that total pension contributions are usually limited by the Annual Allowance. In 2026/27, the Annual Allowance is £60,000, though you may only claim tax relief up to 100% of your annual earnings. Your Annual Allowance may be lower if you earn more than £200,000 or have already taken a flexible income from your pension.

If you haven’t used your Annual Allowance in previous tax years, you may be able to carry unused allowances forward for up to three years. So, if you want to contribute a significant amount to your pension, it may be worth reviewing your previous deposits.

2. Take advantage of salary sacrifice schemes

Check if your workplace offers salary sacrifice schemes where you can give up a portion of your salary in exchange for a non-cash benefit.

It’s important to consider whether the benefit would be useful for you, but you might have the option to use salary sacrifice to access childcare vouchers or private medical insurance. This strategy could reduce your net income so you may be able to avoid the tax trap.

3. Make donations from your salary

Charitable donations you make directly from your salary could reduce your adjusted net income. So, if you already support good causes, you might want to consider whether you’d benefit from changing how you make donations to improve your tax efficiency.

Talk to us about your tax position

As your income rises, your tax position may become more complex. We’re here to help you understand where your finances could be more tax-efficient and how this could fit into your wider financial plan. 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.

5 questions to answer before you withdraw a pension lump sum to reduce Inheritance Tax

From 6 April 2027, many unused pension pots will be included in Inheritance Tax (IHT) calculations.

Since the government announced the change in the 2024 Autumn Budget, an increasing number of people have opted to withdraw their tax-free lump sum from their pension as soon as they can.

Currently, you can access your pension from age 55 (rising to 57 from April 2028). According to MoneyWeek (April 2026), the number of 55-year-olds taking their lump sum reached a five-year high in 2024/25.

However, while many people may be hoping to reduce their pension’s IHT liability, taking funds early might not be as tax-efficient as you think. Not only could funds still be subject to IHT if they remain part of your estate, but they could also be subject to other taxes – depending on how you use them.

Before rushing to withdraw your lump sum, it’s important to take a step back and carefully review your financial plan. Here are five questions you should answer before making a decision.

1. Will your estate be liable for Inheritance Tax?

While most unused funds in defined contribution (DC) pensions will be included in IHT calculations from April 2027, that doesn’t necessarily mean any tax will be due.

As of 2026/27, IHT is only charged on the portion of your estate exceeding your nil-rate band:

The standard nil-rate band is £325,000.
You may have a residence nil-rate band of £175,000 if you leave a primary residence to a direct descendant, bringing the total you can pass on before IHT is applied to £500,000.
If you’re married or in a civil partnership, you can usually share your nil-rate band with your partner – meaning you may be able to pass on up to £1 million before your estate is subject to IHT.

The portion of your estate exceeding your nil-rate band is typically taxed at 40%.

It’s worth considering that your pension pot is likely to reduce as you draw down an income, depending on how long you live.

2. Would the withdrawal be subject to Income Tax?

You can generally withdraw a portion of your pension without being charged Income Tax. As of 2026/27, this is capped at 25% of your total funds, or the £268,275 Lump Sum Allowance, whichever is lower.

After you have taken your tax-free lump sum, withdrawals are typically subject to Income Tax at your marginal rate.

So, if your total income means you exceed the higher-rate threshold, a portion could be liable for Income Tax at the same rate as IHT (40%).

If you only take your tax-free lump sum, it’s worth considering that more of your withdrawals in retirement will be charged Income Tax, as you’ve used up your tax-free allowance.

3. How do you intend to use the money?

When funds are invested in a pension, growth is generally exempt from Capital Gains Tax (CGT) and Dividend Tax. Income Tax is only charged once you draw down more than your tax-free lump sum.

However, taking money from your pot early could result in it being taxed outside of your pension.

Investing: Investments held outside of a pension may be subject to CGT, Dividend Tax, or Income Tax. While you can invest some funds tax-efficiently using a Stocks and Shares ISA, this is capped at £20,000 a year.
Saving: Interest earned on savings may be liable for Income Tax if you exceed the Personal Savings Allowance. In 2026/27, this is charged at your marginal rate, but rates will rise by two percentage points from April 2027. You can save up to £20,000 a year tax-efficiently using a Cash ISA, or £12,000 a year for under-65s from April 2027.
Gifting: Some gifts may still be included in your estate for IHT purposes if you pass away within seven years of gifting. You can make some gifts tax-efficiently, such as by using the £3,000 Annual Exemption.

Ultimately, removing funds from your pension isn’t necessarily the most tax-efficient option. If the money remains in your estate when you die, it may still be liable for IHT.

4. How might a large withdrawal affect your long-term income?

Without careful planning, taking funds from your pension early could leave you short of your required income in retirement.

As a result, you may have to adjust your lifestyle or risk running out of funds later in retirement.

A financial planner can help you calculate how much income you could need in retirement, based on your ideal lifestyle, tax liabilities, and average inflation. Once you understand how much you’re likely to spend, you can determine whether you can afford to withdraw from your pension early.

5. Are there other strategies you could use to reduce Inheritance Tax on your pension?

Naturally, you want to pass as much of your wealth as possible on to your chosen beneficiaries.

There are a few ways you can help reduce the IHT charged on your pension and wider estate:

Spend your pension in your lifetime: In retirement, you will likely draw a regular income from your pension. By pacing your income to ensure it lasts throughout retirement, without leaving a large sum remaining in your pot when you die, you can help reduce the chances of your pension being subject to IHT. A financial planner can help you define a sustainable level of retirement income to meet your needs.
Make gifts in your lifetime: Gifting your wealth can be an effective strategy to reduce your taxable estate. Gifts made outside of your tax-efficient allowances may still be included in IHT calculations for seven years. However, provided you made the gift more than seven years before your death, the full amount will usually be removed from your estate.
Purchase an annuity: Annuities allow you to exchange a portion of your pension for a guaranteed retirement income, reducing the size of your pension for IHT purposes. That said, it’s important to note that you may receive less from an annuity than you paid in, depending on when you pass away.
Leave your pension to your spouse: Typically, assets left to your spouse or civil partner are exempt from IHT. As such, you might consider leaving your pension to your partner. Pensions are not usually covered by your will, so you may need to complete an expression of wish form with each pension provider to assign a beneficiary.

These strategies might not be appropriate for all circumstances. It’s important to consult with a financial planner for guidance before making any irreversible decisions that could affect your finances.

Please contact us if you have any questions about how the IHT changes could affect your retirement plan and tax liability.

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.

The Financial Conduct Authority does not regulate estate planning, tax planning, or will writing.

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.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

Remember that taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief.

Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.

7 ways financial planning could help you reduce stress

Financial worries are common, but engaging with your finances and creating a long-term plan could ease stress.

According to research from Virgin Money (1 October 2025), 89% of people in the UK experience money worries, and a third said they experience this regularly.

Financial concerns can spill into other areas of your life. If you’re worried about money, you might struggle to sleep, concentrate at work, or give your relationships the attention they deserve. So, tackling financial stress could improve your overall wellbeing.

Here are seven ways a financial plan could reduce stress.

1. It could clarify your current financial position

Sometimes, fear of the unknown can be a driver of stress.

A financial plan could bring together your assets, liabilities, and long-term goals, so you have a clear picture of your financial health. This one step could be enough to help you regain your sense of control and banish stress. Even if you find there are gaps in your finances, knowing exactly what they are and how you might close them could relieve stress.

2. Creating a budget as part of your financial plan could help you balance priorities

Managing finances can feel like a juggling act. While you need to ensure you’re meeting financial commitments now, you might also be trying to save for the future. This balance can be difficult and might contribute to stress.

As part of a financial plan, you could create a budget that’s tailored to your needs. A clear outline of the steps you need to take now and in the future could support the development of healthy financial habits that allow you to balance competing financial priorities.

3. A financial plan could improve your resilience to shocks

If your worries focus on what would happen in different scenarios, particularly unexpected shocks, a financial plan could help you gauge how you’d cope now and what steps you could take to boost your resilience.

A financial shock might include your income stopping suddenly if you’re made redundant or are too ill to work. To provide a financial safety net, you might start building up an emergency fund or take out appropriate financial protection so you’d receive a lump sum or regular income in certain circumstances.

While you can’t stop a financial shock from occurring, being prepared could reduce stress now and should you face one.

4. A financial plan could help you feel more confident

A lack of confidence can also be a cause of financial stress. Financial topics might feel overwhelming, causing some people to bury their heads in the sand rather than engage with their finances.

Working with a financial planner means you’ll have someone who can identify what financial tools are appropriate for you and explain how they work. Expanding your knowledge and having someone who can answer your questions can feel reassuring.

5. A financial planner could alert you if a change might affect your plan

Even when you understand finances, changes happen, and they could cause stress to peak again. For example, a government budget might unveil tax changes that apply to you, but you’re unsure what impact they’ll have and if you should adjust your overall plan as a result.

Your financial planner will be able to alert you if your financial plan could be affected and offer tailored support and advice.

6. You could take a hands-off approach

While some people like to be involved in the management of their finances, others find it stressful. Working with a financial planner on an ongoing basis means you can take a hands-off approach if that’s what you prefer, so you don’t have to make day-to-day decisions about your finances.

7. Regular reviews provide a dedicated time to discuss financial concerns

Finally, financial stress can build up if it’s not addressed. So, scheduling regular financial reviews could help you tackle any issues that might be bothering you. Having dedicated time to talk about finances could mean you’re better able to put them out of your mind when you should be focusing on other aspects of your life.

We could work with you to create a financial plan

If you could benefit from a long-term financial plan that balances your short- and long-term needs, please get in touch.

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.

Revealed: The hidden benefits of long-term financial planning

When you think about the benefits of long-term financial planning, the opportunity to work with a professional to increase your assets might be the first thing that comes to mind. While that might form part of some financial plans, the hidden benefits may be even more valuable to you.

A financial plan isn’t only focused on wealth creation. Indeed, in some cases, a plan might involve using assets, such as when you retire.

Instead, it’s a strategy that brings together your current financial circumstances, financial needs now, and long-term goals. It provides a roadmap showing how you might use your assets efficiently to work towards the future you want.

As a result, some of the benefits of financial planning may not be immediately obvious. Here are five that could support your overall goals.

1. A financial plan could identify ways to build wealth tax-efficiently

If you aim to increase the value of your assets, both contributions and returns are important. For some, an overlooked area is tax efficiency.

Choosing tax-efficient ways to save or invest your money could help you achieve your goal sooner.

Imagine you want to invest to secure a long-term goal. Outside a tax-efficient wrapper, your investment returns could become liable for Capital Gains Tax if you exceed certain allowances and thresholds. A financial plan could help you identify ways to invest tax-efficiently that suit your needs, such as using a Stocks and Shares ISA or pension.

2. A long-term strategy may provide you with peace of mind

Worrying about money is common. Knowing you’re working with a professional to manage your finances with a long-term outlook could take the weight off your shoulders.

Feeling in control of your finances could offer you peace of mind and allow you to focus on what’s important to you.

3. Reviewing your finances could improve your relationship with money

A financial plan could also improve your relationship with money.

Working on a financial plan could help you assess how you approach financial decisions and what might trigger poor financial habits. For example, are you likely to make a knee-jerk decision if you feel nervous? Or do you make impulsive purchases without considering the long-term implications?

By understanding your current relationship with money, you may be in a position to improve it, which could, in turn, support your long-term financial goals.

4. Speaking to your financial planner could offer a new perspective

Sometimes you can really benefit from simply having someone to talk to.

Your financial planner will understand your current position and your overall goals, so they can act as a sounding board when you’re contemplating different options. Whether you’re thinking about retiring early or gifting a lump sum to your child, a financial planner can provide honest feedback and a fresh perspective.

It’s a process that could highlight potential opportunities or drawbacks that you might have overlooked if you reviewed your plans alone.

5. A long-term plan could help you achieve financial freedom

Financial freedom means being able to make life choices without constantly worrying about money. You might have assets that provide a passive income capable of covering your essential expenses, leaving you free to enjoy your desired lifestyle.

Financial freedom is something many people want to achieve, but it can be difficult to know when you have “enough”. A financial plan could help you calculate your financial needs over the long term, so you can assess how much you need.

Some people find they’re in a better position than they believed following a financial review, so they can bring their plans forward. If you find a gap in your finances, identifying it early might mean you’re in a better position to make changes to keep your goals on track.

Get in touch

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.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Why you could benefit from reviewing your financial habits as you transition into retirement

Retirement is a significant life transition. Some of the financial habits that served you well during your working life might no longer suit your retirement lifestyle.

Sticking to your current financial habits could mean you miss out on opportunities to enjoy your retirement, or even mean you risk using up your savings too soon. Read on to find out why.

The shift to depleting assets can be difficult for some retirees to manage

As you retire, you’ll often move away from earning an income and building wealth towards depleting your assets.

If you’ve established a good money habit of regularly saving or investing during your working life, it might be difficult to now spend your wealth. It’s something retirees might feel nervous about because they may worry they won’t have enough for later life.

Indeed, according to an Aviva survey (12 May 2025), only half of mid-retirees aged between 65 and 75 who do not pay for financial advice are confident they’re on track to make their pension savings last for life.

Holding on to the habit of limiting your spending could mean the retirement you’ve worked hard to secure doesn’t live up to your expectations, even if you’re financially secure enough to pursue your aspirations.

Alternatively, if you continue with your current money habits and spend as though you have a salary coming in, you might risk withdrawing too much from your pension.

Retirement could also affect what’s appropriate in other areas of your financial plan.

For example, if you continue to invest in the same manner, you might be taking too much risk if you plan to access the money soon. Similarly, if you have debt, how you manage repayment might shift if you don’t have a guaranteed income in retirement.

Balancing different priorities and goals in retirement can be tricky, but a long-term plan could help you adjust your financial habits to suit your short- and long-term needs.

A cashflow model could give you confidence in your retirement finances

A key challenge when managing your retirement finances is that you need to consider how your assets and income needs could change over time. If you retire in your 60s, you might need to create a retirement plan that spans several decades.

A cashflow model could help you visualise your wealth and how it might change.

Your financial planner will start by inputting data about your current finances, and then make certain assumptions to show how your finances could change. These assumptions might include your income needs based on average inflation, your plans, or expected investment returns.

You can then start to test different scenarios to assess how they’d affect your long-term financial security. So, as you prepare to transition into retirement, you might use your cashflow model to help answer questions like:

What income could I afford to withdraw from my pension each year?
Could I withdraw lump sums during retirement to tick off items on my bucket list?
If I increase my income in early retirement, could I risk depleting my pension fund too soon?

With this information, you may feel more comfortable adjusting your money habits, such as using assets to create an income that allows you to get the most out of retirement.

It’s important to note that while a cashflow model can be a useful tool as part of your long-term plan, the outcomes cannot be guaranteed.

In addition, a cashflow model relies on accurate data. So, you should regularly update it to reflect changes to your finances, overall circumstances, or goals.

Talk to us about your retirement plan

If you’d like to talk about your retirement finances and how we could support you as you transition into the next stage of your life, please get in touch.

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 tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate cashflow modelling.