Monthly Archives: May 2017

Can’t We Just Leave Things Alone?

The continual tinkering with various tax allowances, reliefs and rates is getting a little tiresome. While I am all for positive change and simplification in this area, the opposite has been true over past years.

The biggest example of these changes is perhaps the £5,000 dividend allowance, which was only introduced last tax year and is now proposed to be reduced to £2,000 from April 2018. To further muddy the water, these proposed changes have been omitted from the finance act to ‘slim it down’ so that it could be passed before parliament dissolves before the election.

As such, we are left in a strange ‘limbo’, where we don’t know what the dividend allowance will be next year. Given that investment planning is a long-term game, it seems a little unfair to me to introduce an allowance one minute, reduce it the second and then back away from that reduction minutes later still.

These types of allowances do drive changes in people’s investment behaviour. For example, many people have been holding assets in ‘general investment accounts’ rather than investment bonds in the hope of making use of these new allowances. Given the changes, this strategy may not now be appropriate and investment holdings may need to be restructured yet again.

While I appreciate the need for the government to increase tax revenue, it would surely be better to set a lower allowance in the first instance, which could be retained for the longer term, rather than continually tinkering.

Here We Go Again!

So it seems that we have yet another general election, just 18 or so months after the last one! It seems only yesterday that we were voting on the UK leaving the EU.

The assumption, of course, is that we will end up with a larger Conservative majority than we currently have and this assumption would seem to be pretty sound based on the polls conducted to date.

If the last few months have taught us anything however, it is that the polls cannot always be relied upon. In a world where the UK is leaving the EU and Donald Trump occupies the White House (both events which commentators felt were laughable when first proposed), it would take a brave man to say that a Conservative win at the election is a sure thing.

In terms of the markets, once again, it seems that the preferred option will be the expected Conservative win and this will be largely priced in already. Anything other than this expected outcome however could see some more significant market reaction.

I would caution expending too much energy worrying about this however. If the aforementioned surprise events have taught us anything, it is that, even when we do have political surprises and upsets, the predicted market turmoil very often does not materialise and in the above two cases, quite the opposite has been true.

The only thing that is for sure is that we live in fascinating political times and I will be watching the election results with interest come the 8th June.

The Buckingham Gate Investment Committee stands ready to hold an extraordinary investment review meeting if the circumstances dictate.