Taxing times amid election uncertainty

Hands up, how many predicted a hung Parliament when Theresa May called a snap election six weeks ago? Thought as much, not many.

So what happens next?

Can Mrs May form a government (with a little help from some friends)? Will she be able to stay on as Prime Minister? What happens with the Brexit negotiations? Will there be another election? What price Boris to the rescue?

An election that was supposed to give the Conservatives a mandate has resulted in so many questions and uncertainties that there are bound to be a few wobbles on the financial markets.

So, what about your money and your investments?

It’s probably best not to jump to conclusions – post the Brexit vote the pound crashed and the stock market has reached record highs, and not many people predicted that.

Instead of trying to second guess what happens next, look at some certainties like death and taxes.

With an ageing population and many people living way past retirement age, a higher bill for public services in the coming years is inevitable.

The strain is already beginning to show on the National Health Service, and a growing percentage of the population is qualifying for a state pension at a time when the percentage of those still in work is falling.

This election, with its focus on the ‘dementia tax’, the NHS and how to pay for further education rather than Brexit, means the spotlight is falling on how the Government pays for these things – and the inevitable answer is that taxes will rise.

The Government has been borrowing vast amounts of money to fund this deficit and without a boost to its income – the taxes it takes – the black hole of debt grows ever deeper.

Our advice to investors at Innes Reid remains much the same. A looming rise in taxes makes it ever more important to legitimately shelter as many pennies as possible from the taxman.

It has never been more important to take advice and make the best use of your tax allowances and tax efficient plans such as ISAs, Pensions and Venture Capital Trusts (VCTs) to make sure the money you earn from your investments remains yours.

We also recognise that if we experience investment volatility it provides considerable investment opportunities for well managed funds.

For example, a further fall in Sterling is likely to add value to client portfolios with exposure to global equities (even if it puts up the prices when we holiday abroad).

We also believe that money held in cash can be an opportunity missed, especially if inflation increases as sterling weakens whilst UK interest rates remain at record low levels.

To discuss our investment and tax planning strategies, or any other aspect of financial planning, please contact Innes Reid on 01244 347583.