The people have spoken. Or to be more precise, 0.29% of the population has decided that Liz Truss is to be the new leader of the Conservative Party, and the UK’s next prime minister.

After a quick trip to Balmoral tomorrow, she will need to hit the ground running on an unenviable list of challenges.

Whether Conservative Party members are representative of the general population is a moot point. But one thing they do have in common is the view that sorting the cost-of-living crisis should be the number one priority for the new prime minister. It topped the list of issues for 43% of Tory members in a recent survey, whilst 40% of Britons cited it as their biggest concern, according to Ipsos research in July.

And with good reason. Goldman Sachs warned last week that inflation in Britain could reach 22% next year if energy costs continue to soar. This compares to the Bank of England’s expectation of a 13.3% peak this October. Goldman Sachs added that it does not expect the recent spike in European gas prices to persist, but even if energy costs moderate, it expects inflation will peak at 14.8% in January.

Analysis by Carbon Brief forecasts that UK households will spend 10% of their income on gas, electricity and vehicle fuel this winter, twice as much as in 2021. That would make the current energy crisis more severe than those in the 1970s and 1980s. Habits are already changing. A study by the Financial Fairness Trust showed that a third of households have reduced the number of showers they take, whilst the same proportion have cut down cooker and oven use.

Further evidence of the inflationary challenges came from British Retail Consortium data released last week, which showed that consumers are paying record prices in shops and supermarkets. Prices increased by 5.1% in the 12 months to August, the largest rise since records began in 2005.

The benchmark FTSE 100 index ended the month down nearly 2%, whilst inflation and recession fears hit the domestically-focused FTSE 250 harder, as it slumped 5%. Sterling lost almost 5% against the dollar in August, the most since the Brexit vote in 2016.

Capital Economics believes that sterling could fall to $1.05 in the coming months, its lowest level since 1985, based on its forecast that the energy crisis will push the UK and eurozone into recession, whilst the US gets away with a milder slowdown.

Europe’s energy squeeze deepened last week when Russia halted gas supplies to its top customer Germany via the key Nord Stream 1 pipeline. After initially citing the need for three days of maintenance, the state energy firm Gazprom then announced it would be closed indefinitely due to an oil leak. The move came shortly after the G7 nations agreed to cap the price of Russian oil in support of Ukraine.

EU Council President Charles Michel said Russia’s move was “sadly no surprise”.

“Use of gas as a weapon will not change the resolve of the EU to accelerate our path towards energy independence. Our duty is to protect our citizens and support the freedom of Ukraine.”

US stocks ended the month with a whimper as investors weighed the Federal Reserve’s inflation-fighting efforts. After hitting a four-month high in the middle of the month, the S&P 500 index fell on four consecutive days to register its weakest August performance in seven years.

Cleveland Fed President Loretta Mester said she expected benchmark interest rates to rise above 4% early in 2023 and be held there next year. This added another dent to investors’ hopes that the US central bank would ease up on its rate hiking plan in the face of a recessionary environment.

On Friday came news that US non-farm payrolls rose by 315,000 last month, after recording an increase of 528,000 in July. The strong report further cemented expectations that the Fed will continue with its outsize interest rate increases. Next week’s CPI inflation news is unlikely to change that.

“Financial markets have enjoyed a summer reprieve, with many investors hoping that the Fed has already done most of the work to rein in price pressures. But, unfortunately, that hope may have been premature,” observed US investment managers, Payden & Rygel. “The stop-start inflation-fighting debacle of the 1970s didn’t end well for the economy or the markets. This time the Fed is unlikely to stop (ease policy) until the inflation dragon has been slayed, Not allayed, but slayed.”

Divorce is one of the most emotional events you can face, and even though the last thing you may be thinking of is how it could affect your tax bill, this needs serious consideration.

Getting the best advice you can – both legal and financial – is essential if you want to be sure you get what is due to you when your marriage or civil partnership breaks down.

How does a divorce affect tax?

You may think there’s no reason for the tax officer to be nosing into your financial affairs at such a difficult time, but there are tax implications to splitting your assets, and everything must be divided in the right way.

For example, pensions are assets that are often forgotten about, but they can be hugely valuable and must be addressed. In the UK, there are three ways pensions can be split: earmarking, sharing, or offsetting against other assets. Wherever you are in the world, considering the different options available is important to ensure your financial wellbeing – including the pension in a financial settlement on divorce is especially important for women: “This is because they typically have underfunded pensions, because we have not yet got pay equality. It’s improving, but at a glacially slow pace.”

The importance of specialist advice

The ramifications of not dealing with your financial affairs in the best way when you divorce could end up costing both of you a lot of money. You may find you need more help than just a lawyer.

This is especially true as tax changes occur – for example, the UK Government is proposing new rules on divorce and Capital Gains Tax in April 2023 to allow you up to three years to divide your assets without incurring a bill.

A financial adviser will help you get the best financial results, but you may also benefit from a divorce coach to help you navigate this difficult time.

If you’re getting divorced, we can look objectively at your finances and changed goals, and help you make the best long-term decisions for your future. So, contact us today.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

“Mikhail Gorbachev was a one-of-a kind statesman. The world has lost a towering global leader, committed multilateralist, and tireless advocate for peace.”

UN Secretary General Antonio Guterres paid tribute to former Soviet leader Mikhail Gorbachev, who passed away last week.