Category: Political

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Investors in the Cross Hairs

We ended our previous blog with:

 If tax concessions are taken from one area they will seek others. Expect to see changes brought in concurrently to limit ISA contributions and increase the rates of Capital Gains Tax to investments outside of ISAs. The subject for next time.

So as promised here is my take on the increase in Capital Gains Tax and the decrease/capping of an individuals ISA allowance.

Currently there is no CGT on ISA or Pension investments, we expect that to remain the same. This blog is really only of interest if you hold excess investments in a General Account outside of your ISAs & Pensions. If you do not have a General Account there is no need to read on, unless you are interested. The rest of you can get back to what you were doing before this blog interrupted you.

Increase in Capital Gains Tax

We have left this blog quite late, with the Autumn Budget just 48 hours away now, but we have been waiting to see if any clearer information surrounding tax rates would be “leaked”.

Investment capital gains have always been taxed at a lower rate than earned and unearned income. That differential is about to become closer, or indeed fully closed, with maybe even a doubling of the rate of tax. Basic rate tax-payers currently are charged 10% on the gain achieved from holding investments (higher for property gains) Our worst expectations are that this could be increased to 20%. For higher rate tax-payers, their current 20% rate could be raised to 40%.

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Don’t mention it

If you wish to avoid embarrassing moments at dinner parties there are some rules you must follow.

  • Don’t talk about politics.
  • Don’t talk about religion.
  • Don’t talk about sex.
  • Don’t spill any red wine. (Sorry Stephen & Aileen)

Well because this isn’t a dinner party, I guess I’m free to talk about them all. In fact, although the first three rules should sound like 3 separate subjects, they are now all inextricably linked. What’s more, it’s becoming increasingly difficult to have a view on one without needing to have a corresponding tribal view on all three. What am I talking about? Thursday 4th July. Independence Day in the US, but a General Election here in the UK.

Expected effect on investment markets.

Yes the day has come where we will be asked to choose the party to form a government for the next 5 years. A time where the expectation is stock markets will be volatile. But wait a minute, it seems that the “Risk Index”, the VIX in the US and the Citi Macro Risk Index here in the UK is sitting at roundabout all time lows. Just look at the 20 year chart below. This suggests there are no nasty market surprises just around the corner.

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Steady

Budget Summary

I despair at the state of the UK and UK politics generally. Probably global politics. Was that even a UK budget? I’ve already forgotten most of it. I don’t need to remember much because I know most of what was said was just hot air.

  • A new British ISA – I know this isn’t going to happen, within 1 week it’s already been placed on the back burner until 2025.
  • An attack on holiday property entrepreneurs from 2025 – I’ve no idea who else will be buying these former run down properties. I expect seaside towns and other beauty spots to decline without this inward investment. Formerly poor areas will now lose a large part of their much needed tourist economy. Sure local property prices will become more affordable as “out of towners” retreat, but without those tourist jobs the locals will not have the income to be able to buy a local property.
  • Non-Doms told to leave in 2025 – like the Conservative Party even has a say in this. they will be toast probably by November this year. It was always Labour policy to do this. I’ve looked at this area in some detail. Non-Doms do pay tax, pay VAT on their outsized purchases and stump up oodles of stamp duty land tax on multi-million pound property purchases. Non-Doms also employ a small army of accountants, solicitors, financial advisors and investment managers (not me), cleaners, gardeners, hairdressers, manicurists, dog walkers and property maintainers. All of which will lose customers – meaning lower VAT receipts and lower income tax on profits. They are not tax dodgers, just because the investment income they earn and leave abroad isn’t also taxed in the UK. Where does any political party expect to replace all of this lost revenue?
  • Plus some other drivel set to come into force in 2025 & 2026. Who believes any of that will happen with a change in Government?
  • The NHS is broken, let’s throw another £3.6bn at it in the future (a future which we are all sure doesn’t include a Conservative Party). More empty promises.
  • Oh yes – there was the bribe of a reduction of 2% in NI for those working below the age of 66. The trouble is, 1 in 5 eligible “workers” do not work in the UK or register for benefits of any kind. They don’t pay tax or NI. Obviously it is the 4 in 5 that do work that pay all of the taxes. Will £10 a week per worker change any voters mind? I doubt it.
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