The power of politics and panic in investment planning

UK expats who are engaged in international investment and tax planning can be forgiven for feeling a little bit nervous at the moment. Not only must they digest and account for the uncertainties of Brexit, they must now, following one of the most underwhelming general elections in generations, consider the impact of a government that has, if at all, only the most tenuous of mandates to proceed.

Yes, it is undeniable that change is afoot – but precisely how much change there will be and what it might look like remains debatable and although it would be easy to hit the panic buttons, while also shaking one’s fist in the air and cursing Theresa May for unnecessarily calling a snap election, things are unlikely to be anywhere near as disruptive as the headline-happy news media might lead us to believe.

Yes, it’s important to remember that during periods of any measure of uncertainty, it is the news media’s job to scare us all into attention.

This is not to say that the current hung parliament and the Conservative’s tenuous majority alliance with the DUP should not be of concern, only that we should be strategically sober in our appraisal of the situation.

Yes, there remains the possibility that a weakened Brexit negotiation position and delays to the parliamentary process could negatively impact your international investment and tax planning, but it is not going to be easy or prudent for either the UK or the EU to wind back years of mutual entanglement in this regard – for the most part it is likely that the status quo will hold and that UK expats can continue to make plans for even long periods into the future, it is simply that current uncertainties make good financial advice even more important than before the Brexit-general election watershed.

The elephant in the foyer

Of course, there is a massive hypothetical elephant lurking, if not in the room then at least in the back-entrance foyer; in theory, a second general election could result in a Labour Party government and this would almost inevitably result in increased taxation for those of considerable net worth. However, such a scenario should not alarm, it just makes it even more incumbent that investors have prudent international investment and tax planning strategies in place.

There are some things we can at least feel confident of should a Labour government be voted in: income tax would likely increase to 45% for people earning £80,000 per year and to 50% for people earning more than £123,000. However unlikely you believe the prospect of a Labour government to be, the mere hint of such a situation may be a useful nudge to consider your international pension planning, investment and taxation options.

If planning is not for uncertainty, what is it for?

However, it is again important to underline that there is no need to panic. The present is always a good time for people to review their financial plans and bringing planning forward in response to specific events, whether they are of a political, personal or economic nature, is never a bad thing.

For example, if you are thinking of undertaking a QROPS, QNUPS or SIPPs transfer in order to maximise your tax efficiency or you are interested in diversifying your portfolio to increase growth of your savings pot, it can be useful to get these plans firmly in place as soon as possible.

Similarly, if you run a business or have significant assets, now may be the time to speak with your financial adviser about the steps you can take to reduce the possibility of any tax increases affecting you in the future. The options are too numerous to list here, but might involve some kind of income-splitting arrangement or selling a business and quickly investing in another to make full use of roll-over relief.

Don’t overestimate the power of politics

As ever, when it comes to international investment and tax planning, sooner rather than later is always likely to be the best strategy. Playing the waiting game is, on most occasions, only going to result in stasis, nervousness and, ultimately, probable loss of compound gains on your investments. Politics is important and should never be trivialised but, in a global world, its economic impact is far too often overestimated.

Uncertainty may bring a certain amount of nervousness, but don’t let anxiety paralyse you into inaction. Your best chance of getting ahead during uncertain times is to seek advice and to plan meticulously.

Contact the Blacktower team today, either in our Algarve or Lisbon office, so that we can assist you in your financial and investment strategy planning.

By Manuela Robinson

Manuela Robinson is Joint Country Manager for Blacktower Financial Management (International) Ltd, with offices in Quinta do Lago and Cascais.
[email protected]
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Blacktower Financial Management (International) Limited is licensed in Gibraltar by the Financial Services Commission Licence 00805B. Blacktower Financial Management Limited is regulated in the UK by the Financial Conduct Authority.