With the calling of a snap General Election on 12 December to try and break the Brexit impasse in parliament, political uncertainties will continue to loom large in the minds of investors over the coming weeks.
While the election is destined to focus on how, when and if the UK leaves the European Union, the outcome could also have significant personal finance implications beyond the economic impact of the leaving the EU. This is because of the starkly different policies offered by the major parties on areas such as Income Tax, the taxation of gifts and inheritances, the property market, independent schools and Labour’s nationalisation programme and proposed Inclusive Ownership Funds. The latter would require medium and larger-sized businesses to ‘give’ up to 10% of their shares away into trusts for employees, a measure that would impact existing investors including pension funds.
In this highly charged environment, short-term volatility in both the value of sterling and the stock market has to be expected but it is important for long-term investors to keep calm and not take rash actions. Making major investment decisions based on ‘what if’ political scenarios is fraught with risk.
It makes sense to focus on the things we know might help to mitigate any changes that could stem from political events and which make good sense anyway. Anyone concerned about the impact of a possible change to a Government with an appetite for higher taxes should consider securing the valuable tax allowances that are currently available and a known quantity today. These include ISAs and pensions.
Whoever is in Government, there is no certainty that such allowances will remain available in their current form in perpetuity. However, we do know they are available today and how much can be sheltered from the taxman in them.
Securing such allowances ahead of any future Budget does not require an immediate decision on where to invest, as subscriptions made can be held in cash. In the case of ISAs, there is complete flexibility in the ability to make withdrawals if you later change your mind. So, keep calm and carry on.
If you have any questions about the upcoming General Election, your investments or using your tax allowances, please speak to your Tilney contact in the usual way or call us on 020 7189 2400.