Share Prices & Company Research


15 May 2017

A good housekeeping guide for times of change

Andrew Priestley, stockbroker at Redmayne-Bentley’s Harrogate branch, discusses how investors and savers can keep their house in order during times of turbulence.

"I have been something of a nervous passenger in the markets for some time, unsure as to who or what was driving share valuations. I have been unable to reconcile the investor response to developments, which I have viewed as unsettling and adverse political, geopolitical and economic outcomes.

"The growth of populist politics, which took the developed world by surprise last year, was highlighted again in the recent French Presidential elections. In reality, these votes for change present acute challenges in their implementation; witness the absence of any meaningful policy introduction from Trump and the ‘stonewall’ responses in Europe as we trigger Article 50.

"Change is unlikely to be quick or unopposed, and there is every prospect that disillusionment with politics will become further entrenched. I suspect the coming UK general election may prove a catalyst to that process. Whatever its outcome, it is unlikely that future tax policies towards investors and savers will be more accommodating, possibly quite the reverse.

"The populist uprising found its roots in the general disillusionment with politicians and central bankers, who have presided over a period in which monetarist policy made the wealthy wealthier and left the poorer to carry the burden of austerity. The political response is likely to include appeasement policies designed to curb these inequities, if not reverse that trend, increasing the burden of taxation on those with high income and substantial assets.

"The March Budget measures, affecting both pensions and dividends in the next tax year, may now not be enforced, and the rise in national insurance contributions for the self-employed was quickly stifled, but I believe the direction of travel is clear. After a veritable bonanza for UK investors in 2016, with markets trading close to historic highs, it looks like pay-back time.

"With that in mind, it seems both sensible and timely to attend to financial housekeeping and to look to utilise the ISA allowance, either via the annual subscription or, if necessary, by moving non-ISA investments into the tax shelter. A married couple ought to be able to shelter the future income and capital gains on £40,000 by doing so. It may make sense to move high yielders first, but one should not forget that the £11,300 personal Capital Gains Tax allowance for 2017/18 might permit historic gains to be capitalised via ‘Bed and ISA’, with the underlying investment either retained or proceeds re-deployed as objectives dictate. It’s also worth remembering that under current legislation, any cash or income withdrawn from an ISA during a tax year can be put back in within that same tax year.

"So far as inheritance tax planning is concerned, we are told that nothing is as certain as death and taxes. AIM portfolios containing eligible AIM-traded shares held and retained beyond two years fall outside your estate.

"Any action should be considered in the light of individual tax and financial circumstances. If in doubt, seek professional advice. If you want to weather future storms, fix the roof while the sun is shining."

Please note, investments and income arising from them can fall as well as rise in value and you may lose some or all of the amount you have invested. Past performance and forecasts are not a reliable indicator of future results or performance. Tax treatment depends on the specific circumstances of each individual and may be subject to change in the future. There is an extra risk of losing money when shares are bought in some smaller companies, including AIM-traded shares.

A good housekeeping guide for times of change
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