This was especially true in the UK, where the Government is due to announce its Budget on the coming Wednesday. With an election due later this year, and the Conservatives currently polling poorly, UK Chancellor Jeremy Hunt is widely expected to make some headline tax cuts to boost support. At the time of writing, many are predicting a cut to Income Tax of 1-2%. The UK economy has been struggling for growth lately, and it’s likely Hunt will be somewhat constricted in what he can promise. However, we won’t know for sure until the Budget is released.

It should be noted that tax cuts could lead to increased spending and therefore inflation. The Bank of England is already expecting inflation to rise in the second half of the year, even before accounting for any Budget changes, which suggests interest rate cuts are likely to be limited in the near term.

Looking ahead, Azad Zangana, Senior European Economist and Strategist at Schroders, said: “The first cut in UK interest rates is forecast for May (0.25%), followed by another in June. However, due to the expectation that inflation will then rise, interest rates are then only lowered by another 0.50% over the rest of the forecast, ending the forecast at 4.25%.

“The general election is highly likely to result in a change in government. The left-wing Labour party has a strong lead in popular opinion polls, which tends to prefer a more interventionist set of policies, with higher taxes and higher public spending. However, Labour’s leadership have not made many pre-election pledges yet, and those that were made have recently been abandoned, owing to costs.”

Overall, the FTSE 100 fell slightly, finishing the week down 0.3%.

In the Eurozone, it was revealed that Consumer Price Index inflation fell to 2.6% in February. Although this marked a decrease from the 2.8% recorded in January, it remained above the generally predicted rate of 2.5%. The decline was primarily attributed to lower food price inflation. On the other hand, inflation relating to services remains stubbornly high.

This news was particularly timely as the European Central Bank is due to meet to discuss interest rates next week. A number of commentators had been predicting an April cut, but these forecasts have now been pushed out until at least June.

As the inflation figures came out only on Friday, they didn’t have much time to affect markets last week. The MSCI Europe ex UK Index finished up 0.5%.

The US and Japan continued to act as bright spots in markets. Last week was another strong one for Japanese equities, which continued to rally amid persistent weakness in the Yen and a highly supportive monetary policy backdrop. The 2.1% increase in the Nikkei 225 in local currency terms took the total advance for 2024 so far above 19.0%, an impressive outcome given the magnitude of gains already made last year. The rally has helped lift the Nikkei Index above the 40,000 threshold for the first time in its history, having returned to levels last seen in 1989 last month.

In the US, equities also continued their own upwards march with the S&P 500 and NASDAQ rising by 1.0% and 1.7%, respectively, in US dollar terms. Gains were seen across the various underlying equity sectors, although growth stocks ultimately led the advance once again.

The US market was helped by inflation data released last week. The Federal Reserve often looks to ‘personal consumption expenditures’ (PCE) inflation as part of its interest rate decision-making processes. Last week, it was revealed that inflation measured this way fell to 2.4% in January, from 2.6% in December. This was in line with expectations, and investors reacted following the old adage of ‘no news is good news’, helping spur further market growth.

Tax planning may feel like a low priority for new business owners as you understandably focus on getting sales and operations off the ground. But optimising your tax position is just as valuable in a start-up as it is in larger organisations.

Smart fiscal planning from the launch can significantly impact your cash flow by helping you make the most of your tax allowances and avoid fines for non-compliance. You may think tax planning becomes necessary only once you start making a profit. But it is equally important if you experience a loss in the first year or two – for example, it can help you offset these deficits against other taxable income.

Simon Martin, Chartered Financial Planner at Technical Connection, says one incentive to plan from day one is that most tax allowances work on a “use it or lose it” annual basis, so if you don’t use an allowance one year, you can’t use it the next.

“You don’t want to miss a year or more of planning opportunities because you didn’t get round to it,” he says.

Simon adds that money is often tighter in a start-up, so using allowances or exemptions can make a critical difference to your cash flow. “It’s also crucial to ensure you’re taking income from your company in the most efficient way,” he says. “Every pound you save in tax can potentially be used for income or to reinvest into your business”.

Simon says tax planning is also crucial to understanding how your business and personal goals fit together.

“For example, many start-up owners plan to sell their businesses in future,” he says. “But what if that doesn’t work out or the sale price isn’t what you hoped for? It’s important to also start moving money into your own name by paying yourself properly and making pension contributions. Financial planning can help you reduce your level of risk by diversifying away from your business and therefore help protect your retirement goals.”

The sooner you make these plans, the better. Early saving makes a huge difference to the final sum available for retirement due to the cumulative effect of long-term investment returns.

“This will be a prudent and responsible Budget for long-term growth, tackling inflation, more investment, more jobs and that path to lower taxation as and when we can afford that.”

UK Chancellor Jeremy Hunt explains what we can expect in his upcoming Budget.